Nothing is 100% certain in this business. That is what allows individuals using mere discretion to make money by clicking mouses and pressing buttons. If trading was 100% certain, the robots would have taken over a LONG time ago. There in lies the paradox of trading. You want the edges to be big enough and consistent enough to make a decent profit, but not so big and consistent that they can be done by a robot with just rudimentary AI.
You need times like 2017 and now, to throw the robots off the scent, to get traders to abandon historically robust models because they aren't working over the last 12 months. Times like these are uncommon. A VIX staying below 10 while the market rallies relentlessly with not even a 3% correction are rare. It is times like these which make traders ignore the inherent risks of sudden price declines, and instead chase riskier strategies like selling volatility to make their returns.
You can't just hold bond and expect a risk free 5-6% anymore. So rather than lower their return expectations, investors are going out on the risk curve, from government bonds towards corporate bonds, leveraged loans, subordinated debt, etc. From cash to equities. If you are a follower of financial Twitter, I am sure many of you have seen the charts of the dropping cash allocations for individuals and funds, back to late 1990s levels. Also mentions of the low equity put call ratios. Retail is buying into this market, and bullish. I can clearly see the shift in the tone on Stocktwits, from skepticism about the rally in 2016, to outright optimism due to tax cuts and the "strong" economy since the fall of 2017.
Or you can just look at the chart of the S&P over the last 2 years. 50% move off the bottom in early 2016. And even at that bottom, at SPX 1810, the market was overvalued based on historical P/E and P/B measurements. There is so much overvaluation built into this market, a lot of potential downside energy is stored here. It is hard to predict when the dam breaks, but the risk seeking attitude of investors tells me that its not far off. I started a small short yesterday, and down a bit, but will hold for a pullback. I will give the trade at least 2 weeks to work out, and may add more if I see a bit more of a rally.
Subscribe to:
Post Comments (Atom)
Posts
12 comments:
I'd be happy if we could just get back to 2710 but imagine the damage this market could do in 2 weeks.
The first layer of strong support is 2690-2695. I would look to cover there.
Yeah that would likely be the 1% pullback lol. 2732 and counting.
The opposite of a bottomless market here. Will need full short capitulation before it drops. Unfortunately right now everyone is getting long.
I got short through calls on SQQQ at the close yesterday and saw the QQQ up another half a percent when I woke up. I said fuck this and promptly sold that shit. I think the trump administration put an order to the Fed to bid this market up. FOMO is bidding this market up. Almost convinced of it. Also bitcoin and alt currencies are not helping and looks like bitcoin about to hit its high again soon
To painful now. I'm out. This market so strong.
Not fear of missing out thats bitcoin but fed open market operations
There is a reason Trump is showing Yellen the door out. He's gonna put his own boy in there and do maybe 1 hike at best and bring this market up. What goes up must come down. I'll have to buy 2 year long dated puts later this year to stay solvent longer than the market can stay irrational.
I'm glad though that Trump is president and cut taxes to keep the economy running on fumes for another year. Hahah while the economy is still good, I'll find another job later this year to leave the shitty one i'm in now after 2+ years, find another slightly less shittier job, then bank big coin when bitcoin turns to shitcoin and the stock market takes a big crap.
Good plan. Take the loss and get back in at a better price. There will be a lot of potential money to make once this bubble pops. I give it 6 months at most. Don't think Trump is responsible for these moves, it is crowd psychology at work, with a 9 year bull market with every dip being bought that has made FOMO the primary mindset. Now that retail is very bullish, the crap will hit the fan soon enough.
Are you still staying short here MO?
Yes, I am staying short, but not going to add. I plan on exiting on the next 20 point pullback. Will accept a small loss on this trade.
Post a Comment