Tuesday, September 6, 2016

Test of Patience

There are no called strikes in investing.  Unlike baseball, you can take as many pitches as you want and you don't have to swing.  But it is hard to just sit there in front of the computer and do nothing when your job title is trader.  It is excruciatingly boring in the stock index futures space, and it is not much better in the bonds or commodities.

You need to have investors losing money in order for them to take action.  Right now, most investors are up on the year, and near their highs.  They are comfortable and calm.  There is no rush for them to make any moves, to either catch up or to protect their gains.  Most are just content to follow the indexes as tightly as possible and not do anything rash to get fired.

When investors are cool and calm, it makes for a difficult environment for traders.  These are just not the type of markets that I can make decent gains in.  And I don't want to play bigger just to squeeze out some gains in a nonvolatile market.  The markets have been churning, but not moving enough in one direction or the other for me to find good fades.  I guess buying the small dips have paid off consistently for the past several weeks but it is like picking dimes in front of a bulldozer when the indices are overvalued and at all time highs.

Just trying to be patient here and just watch and wait for the right time to strike.  As Trump has been catching up to Clinton, we should be getting some presidential election nervousness in the coming weeks.  Perhaps after the FOMC meeting is out of the way and the Fed confirms that they are all talk, no action.  Anyway, I think we should get a healthy pullback of at least 3-5% before the election, just a matter of when it happens.  Perhaps a more dovish than expected Fed in September 21 will be the final blowoff for this rally and I would use that to short.  In the meantime, I wait patiently for something to happen as the paint dries.

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