This market has killed everyone to different degrees this year. Very few are winning much unless you managed to perform legal insider trading like Ackman or you are a pathological lying penny stock trading high school student that managed to con New York Mag into believing you amassed a $72 million dollar fortune. The Play this year was to walk into your office on January 1st and buy 30 years bonds, put your feet up on your desk and watch the QE drama unfold.
I, on the other hand, have been stalking this top like a saber toothed tiger. Slowly watching for set ups that make bulls yelp in pain. Well, I am hear to tell you that I am exhausted and worn out. I am up 5% for all my troubles YTD and would have been better off clipping bond coupons with 20% plus appreciation.
We have had 5 set ups this year that have not completed. Prior to this year we have not had a single set up. I was a bull then and I will become a bull again someday. I am not a perma bear. I believe in cycles and the natural rhythm of things. I want to pick stocks but when the whole market is set up for a 50% plus correction stock picking is a moot point.
The Fed has really screwed this up royally as we sit at the end of 2014 in what is the most dangerous stock market set up in the history of the DJIA since its inception on May 26, 1896. Why do I say that? The longer you stretch a cycle through manipulation (yes QE is manipulation) the more likely you crash in both price and time due to the levered speculation that has built up over the last 5.5 years. The mother of all margin calls is coming. The commodity/oil crash is a prelude to what is coming to stocks. Equites were crashing in October as well but as you know it took three Central banks to extend the rally out of the October low that was destined to roll over and crash.
Well I got news for everyone. We have a new set up that looks even better than the September 19th set up. The reason why is we managed to suck in even more poor hapless souls in at the top and most of the bears have capitulated. There are no more natural buyers of stocks except the Central Banks.
So why am I pissed. It is because I am gun shy due to the October CB surprise that foiled my plans to reap outsized profits in a very short period of time. Because I am gun shy I don’t have as much exposure to the short side as I would like. And even though I will make a lot of profit should we correct meaningfully it could be much more if my head weren’t rattled. Many of you bulls should be very frightened because the Market Gods will not allow me to make obscene profits which means we will likely see a big correction. That is how the market works. It is messing with me big time.
Here is my game plan. If the Fed were to do something crazy like QE4 this Wednesday I will cover and get so scary long it will make your head spin because then we will double this market inside of six months before a crazy blow off top. If the Fed does nothing then we begin crash mode and after a big correction (20-25%) I will cover awaiting the QE4 announcement. I may add to my shorts sometime this week if I can muster the courage. Why do I think that if I add to my shorts the Fed does surprise QE4 and if I don’t we crash? Such a cruel mistress this market!
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Good piece Blue, as an amateur sitting on the sidelines not sure what to do, I’m tempted to buy leaps in 4-5 energy names that are down 50% or more and hope for a rally sometime in the next 12 months.
lightened up here going into the holiday week.
TLT or SPY would have been easier than what I had to endure this year.
$usd crack pre-market sends /es down 15 & falling
dangerous, indeed .. this market may put the seasonality trade forever to rest
Yea Blue same here.. That October/ biggest rally in 100 years threw me off my game big time and almost ruined me. CB role should not be to interfere with free markets.
the play of the year was to buy apple.
i did, and sold too early.
All spent out-no margin though. If I had more money I would
buy something. Feels like I’m in a giant
garage sale.
Hell of a tape today. VIX has stayed up through the whipsaw. We’re about to experience a crazy move here.
Blue, You are the man!
Many thanks for the outstanding TLT call.
Blue,
Don’t know if you ever read or listen to Lance Roberts but he is always worth a read. He has a really good article out tonight with technical levels to watch and showing how stretched we really are up here in outer space. We could correct all the way down to like 1775-1795 and still be within the upward channel we’ve been on in the S&P.
http://www.investing.com/analysis/corrections-and-the-%27real%27-world-236002
LVS .. enough said .. excellent call Herr BlueStar
Great piece. The problem with being on the bear side IMHO is that it might logical/correct there are just so many other forces working against you. “The market can stay irrational longer than you can stay solvent!”
This levitation before the fed is the last thing I’d want to see before the fed. Setting up for major disappointment for Bulls when Yellen does nothing to prop up markets.
If we don’t have new HOD before 2PM it’s crash time baby. That SPY 185 phantom bar earlier today adds some credence.
Yeah looks like a retest of the breakdown on the RUT. A lot of shorts covered here this morning ahead of the FED. Why? Because they are gunshy and afraid to be short into the announcement.
But guess what, QE is not coming back and yes, rates are going to rise sooner than later. The fed has to raise rates soon so they have some ammunition to use, i.e., rate decreases, QE, etc., later on when we inevitably have the next crisis/downturn.
Blue, sold my Puts today, made 70% ish on SPY, QQQ and bout broke even on IWM. Was up over 200% before the steep rally. No reason to hold those January puts. Am all ears on when to repurchase. When this unwinds it is going to crush mugs.
jersey whale,
you have plenty of time. wait for oil to settle down.
mtpennybags,
I guess you and I should have listened to TLC and lisa one eye “don’t go chasing waterfalls”
matt_bear
So far I am wrong on AAPL. Trust that will not end well.
gorby,
wait a year. there will be a half off sale.
billiejones,
you are welcome
quality,
thanks.
juice,
I covered at $58 like a dope.
berniecornfeld,
I run tight stops, puts and precise timing tools to stay very solvent.
ictmoneyman,
I have march’s and plenty of dry powder, I will let people know when i add.
Blue, is it your understanding that the Fed will be reinvesting its matured treasury holdings? If so, how do they buy them: scheduled POMO, government automatically gives holders the option to roll over, or some other mechanism? Thank you for your anticipated response.
Blue
You were wise to hold off on more puts.
Maybe you’ll end up even for the year.
nocturne,
I don’t know how it works. good question.
Gorby,
Still up 2%. Look at AMZN. It has been helpful.