Wednesday, February 17, 2016

Sold Longs

I sold my longs and I am now back in waiting mode.  The meat of the up move has been made, so the risk reward is back to average.  The action has been extremely bullish, more bullish in comparison to the thrust off the bottom in January 20.  You've also had more time elapse from the initial selloff that began at the end of last year, so more bears have taken their positions and more risk has been taken off.  That leaves much more potential for a lengthy bear market rally.  If I had to put on a trade here for the next 4 weeks, I would go long.   But I prefer to be in cash to take advantage of any potential opportunities to buy back a little lower.

Now that we've gone up 110 points from the bottom, I am sure everyone will be staring at the double bottom made at S&P 1812 and think this is a repeat of last fall.  Fat chance.  Although I am not looking to short here, I am no raging bull.  The S&P has proven itself to be strongest, so if I am going to short, I would rather pick on easier prey like Europe or Japan.  Or better yet, crude oil.  You get no medal of honor in trading for beating the toughest opponent.  Money made shorting crude oil spends just the same as money made shorting S&P.

The most promising trade in the coming months will be the long Treasury trade.  We are still in the middle of that trend, and it looks like its going to be a monster.  Those all time low 10 yr yields in 2012 of 1.38% will be challenged.  With a weakening economy and the Fed out of the picture, there is no barrier to this trend.

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