Run Quickly or Not at All

  "Run Quickly," or not at all; that is to say, act promptly at the first approach of danger, but failing to do this until others see the danger, hold on." - "Speculation as a Fine Art", Dickson Watts


These are exciting times for stock traders, with bankrupt stocks going up hundreds of percent, dogs and donkeys with fleas suddenly turning into thoroughbreds.  If I wasn't already short, I would be having a field day in this market.  But we can't give up on the shorts.  The moment of maximum pain for short sellers is the moment of greatest opportunity.  We've already come too far, there is no turning back.

We are finally seeing that intraday volatility at the top with huge volume that often signify a change in trend.  In an uncommon occurrence, you saw the VIX rally with stocks on Monday.

The VIX is having a hard time getting below 25.  Let that sink in.  25.  Back in the low volatility days from 2013 to 2017, a VIX move up to 25 was considered a big VIX spike.  Now a VIX at 25 is the resting pulse rate for this market.   And when the market starts moving, that pulse rate will easily get into the 30 and 40s.  

In the high VIX environment of the late 1990s and early 2000s,  the VIX during market calm was between 18-20.  So that tells you something about this market.

A symptom of excess speculation and overvaluation is a high VIX.  The shorts are running scared and are unwilling to provide upside resistance to halt the advance.  Portfolio managers have underperformed badly and need to catch up by buying junky small caps, leading to a sharp drop in the Nasdaq 100 to Russell 2000 ratio over the past few weeks.  

 With the Russell 2000 surging, small speculation has hit a level of mania that I haven't seen since 2000.  This tops Jan. 2018, Jan. 2020.

"Public opinion is not to be ignored. The rule is, to act  cautiously with public opinion; against it, boldly. To go with the market, even when the basis is a good one, is dangerous. It may at any time turn and rend you." 

" The foolishness of the many is the opportunity of the few."
 - Dickson Watts

 Public opinion has bought into the statements:  "Don't fight the Fed" and "The Fed has your back".  It is dangerous to go with the market when that belief is so pervasive.  There are modicums of truth to all these financial cliches, but they are usually a shortcut for doing deep dive analysis of stocks and the market itself.

The past 2 overnight sessions have seen sharp swoons during European market hours.  The market looks saturated with bulls, any minor catalyst or even just a change in momentum could make the herd stampede for the exits.  Be careful with longs here.  Very careful.  It is a time to be bold with shorts going against public opinion and the Robinhood traders.  It is a time for a reverse Robin Hood.