Redeveloping a Bearish Mindset

I am a natural bear.  So I took some hits during this 6 year bull market, but I was able to survive by giving the S&P the utmost respect as a bear.  I gave up on shorting it.  It saved me countless times when it was tempting to short in 2013 and 2014.  But it has cost me dearly so far in 2015, in missed opportunity cost.  If I had just been in a coma the last 7 years and woken up on January 1, 2015, I would be gobbling up points on the short side.  This is my kind of market, with my pre 2009 bearish mindset.

But I haven't been able to capitalize, because my bearish mindset has been dissolved away by the 6 years of relentless rallies, BTFDs, and dips that go away in a flash.  Once you develop a long term bias on a market, and it gets confirmed month after month, year after year, eventually it sticks.  I am sure I am not the only one who is stuck with this bullish-leaning bias.  The natural bulls of course are loving this.  And a lot of the natural bears either adapted to the bull market or have gone extinct.  Those that have gone extinct are the ones that would be thriving in your 2015 stock market.  I don't even want to mention the crash mongers, as they give bears a bad name and probably don't even trade anyway.

One of the few benefits of this long bull market has been discovering the bond market.  I had to find other ways to express my bearish views without having to short equities, so I found the bond market.  I had for the longest time ignored the activity in the bond market, I was always an equity guy but since 2013, it hasn't been boring as first expected.  Instead, it has been a source of trading opportunities that are more frequent than I first expected.

Over the coming months, I will work to regain the bearish mind that is now buried inside after having been shelved for a long time.  It is not going to be easy, because the bearish bias has only really started to pay off over the past few months.  But with the overvaluation, long term bullish sentiment/TINA attitude,  overallocation to equities, weakening global economy, and the sheer length of this bull market, almost everything seems lined up for the bears.

One of the ways I will redevelop a bearish bias is to make sure I read more bearish articles and authors: Zerohedge, Harry Dent, John Hussman, etc.  What about a blowoff top that rips the face off the bears?  I just don't see the catalyst, as the one that has been used over and over is central banks, and that is pretty much all used up, and well-known.  No, I don't expect a blowoff top in the S&P 500, there just isn't anything to get excited about to ignite one.  You didn't get one in the 1966, 2000 (that was Nasdaq, not S&P), and 2007 tops.

An outright short of the S&P 500 is no longer a no-no, but now an essential part of the current bear's arsenal, along with bonds and yen.

Today is setting up for a theta burn, tight range garbage day.  It is Friday after all.  Gone are the days of the Friday selloff with the advent of the weekly options.  Now put option selling institutions have a vested interest in keeping away big down days on Fridays, especially when there is a lot of put open interest for the week.  Plus Yellen is due up to speak later this afternoon, I am sure she will have some encouraging nuggets for bond and stock bulls.