Tuesday, March 10, 2015

Too Cautious and Missed It

I should have just shorted the S&P 500.  Recently, I have been bearish on the stock market, but all those years of a relentless bull market, shorting and getting my face ripped off, with stock buybacks getting bigger and bigger made me cautious when it came to shorting the big daddy.  And I missed the move.  I wanted to short a proxy, like USDJPY, when it went up some more, and I just missed everything.  Missing this down move in the S&P is regrettable, there were quite a lot of warning signs, such as overbullish sentiment while making just marginal new highs, weak market breadth, and the continuing strength of the dollar.  Yet I couldn't pull the trigger.

There is almost no doubt that we are now writing the final chapter of this bull market.  You can see the signs, when the worst equities (European equities) are now the most loved.  That always happens at the ending stages of a bull market.  Investors always go out on the risk curve and reach for more speculative stocks, fundamentally weak laggards, etc.

This down move which again, like in late December, came without warning, without any volatility at the top, and is happening basically in a straight line.  All I can hope for is one more rally off this pullback to short.  The time to be cautious about shorting S&P is over. For the rest of this year, I will have to anticipate a drop before it happens, instead of waiting for market price action to show me hints, because this market now goes down without any price action warning.  Welcome to your 2015 market, where fund managers are now fully saturated in US equities and have overextended themselves into no growth, European and Japanese equities.  This will end badly.

For today, looking for a gap and go day, a bloodbath finishing near the lows.


Anonymous said...

Hi, what exactly is shortage of USD funding? Thx

Anonymous said...

why not sell DAX futures 1% off the highs? generally I think you read on this market is very on point

Market Owl said...

Shortage of USD funding? That was a 2008 problem when a lot of debt issued in dollars had to be repaid as the dollar was getting stronger, causing pain for foreign borrowers of USD.

Yeah, shorting Eurostoxx is probably a good trade, although I'd like to see the euro bottom out first. It goes down everyday.