Wednesday, June 10, 2020

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 ac 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. 

14 comments:

OL DAWG said...

Sold tlry calls and two. Long qqq 244 aug puts 10.92

OL DAWG said...

Lol what a clusterfuck.

soong said...

오늘 처럼 완벽한 코스피 풋옵션 매수 타이밍은 다시 오지 않을 것입니다.0.01 짜리가 10.00이 되는 날이 오고야 말았긔있긔없긔

OL DAWG said...

Im mad at the amount of manipulation the fed is doing to this market. Trump is behind this. What does he want? 5000 spx by the election?

OL DAWG said...

Hmmm let me see now. Zero rates till 2022. Maybe qqq will go back to 237 the old high.

You can forget about your crash now. I say its loss management now. Maybe you will be lucky enough to cover at 3000.

You can kiss you 2600 to 2800 good bye for sure. Unless we are hit by a meteor or invaded by aliens

OL DAWG said...

I see the finished the left side of the middle finger fuck you formation. Heres to hoping we can finish the right side

Market Owl said...

We are going much lower. Hang on to your shorts, its going to be a steep drop. FOMC meeting out of the way, what are the bulls waiting for now? Sell the news on the Fed. They aren't doing anymore until SPX drops bigtime.

ABHK said...

Just had the infamous (and for me, the first time in 17 years from this guy) message from my firefighter-best mate who said quote "My wife says its a great time to invest in the stock market, what do you think?". Just in case I needed any other reasons to be short... speaking of which we finally get some consolidation tomorrow. Couldn't print broad new highs despite a landslide of 'good news for stocks', $-weakness, and another rigged FED meeting + presser

Anonymous said...

Anonymous Anonymous said...
weak bears are feeling the pain and turning bulls
i see a sizable down day tomorrow that will create a bull trap
like you analogies and analysis !

Market Owl said...

I am not daytrading this. Will not cover my shorts and lose my position when the odds are this much in favor of the bears. Everything is lining up for a brutal retest of the March lows.

Market Kid said...

What a volatility..it seems like drug called FED begin to not work??

Market Owl said...

ABHK, Thanks for the anectode. I am getting a similar read from Twitter and the financial media. The turn will be vicious.

박숭세 said...

9월이나 올해 말쯤,축포를 듭시다.My Master

Market Bear said...

ready with my shorts on QQQ, XLF, OIL lets rock n' roll tomorrow