Why did I even bother trying to play for a small pullback by shorting the top. You had no post Thanksgiving hangover in the market. Thanks to more feel good news on tax reform from the Senate, the S&P went straight up from the opening bell. I still have a small short, but will look to get out before the end of the month.
Fast Money crowd were raging bulls yesterday. All the good news from Senate tax reform debates did its job. With the extremely low put call ratios and the seasonal weakness for this week, it was worth a shot but the momentum is just too strong, and those with big gains seem reluctant to sell this year. It feels like a toned down version of 1999. Instead of retail being excited about stocks, it is the institutions. Retail has flocked to bitcoin, the institutions have flocked to stocks.
Eventually the shorts will get paid well, probably next summer, but timing the top is key. It is very hard to stick with a losing position that will pay off big and suddenly. In order to catch that sudden down move, you have be willing to hold a short position for the long run. Not easy to do when long term shorts have been a one way ticket to the poor house.
Don't see any long term signs of a top yet, but we sure are building a lot of air underneath. It will make the volatility all the more crazy when the market goes back to trading a more reasonable valuation.
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6 comments:
Just like I have been saying all along. 2750 is within reach. Next summer we lower the boom. 2 year spy or qqq puts by the end of 1H18
The market is in a broad rally, while VIX is surging at the same time. Is this unusual? What does it say about the market's expectation?
VIX going up with the market is usually a sign that the rally is in its final thrust higher. But since we are heading into December, it is a tough short. I do think we are very close to the top, in price, but not yet in time. We should trade in the 2600s for quite some time.
a sign that the rally is in its final thrust higher
- that's a good call.
it looks like smart money is in the options market. is this true from your experience?
No. There is no smart money that you can follow consistently. There is dumb money and not dumb money. Not dumb doesnt equal smart.
The not dumb money is basically taking the other side of the dumb money, not because they are smart, its just because that is their job description.
Commercials in futures markets are not dumb money. Options market makers are not dumb money. Bond dealers are not dumb money. But they are also not smart money.
enlightening
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