This news-driven market has delivered again, with central banks around the world making moves to increase liquidity in the global markets. The major indices are up over 3.5% across the board as I write this, and bears who were feeling pretty good with the futures down last night have seen their portfolios take a sharp turn down a one-way street into an unfriendly neighborhood. If nothing else, the action this week shows you that just because this market has been largely unfriendly to longs, it does not necessarily follow that shorts have had an easy or even fair time either.
That said, I am overall still fairly skeptical of markets gapping in either direction the way this one has. Just as a down 3-4% brings out the cockiest of bears, a day like today brings out the same qualities in bulls. Rather than getting swept up in the emotions of the moment, which can run high on a dramatic gap higher like this one, the better approach is to focus on whether you are seeing setups that fit your style. I remain troubles by the lack of high probability long swing trading setups, but that can change within a few days of action. Most issues are seeing huge gaps higher on their daily charts, adding to the sloppiness of many of those technical patterns. It is a plus to see the VIX back under 30, but staying below that level has been a tough nut to crack.
As 12631 members know, I walked into today with 14% of my portfolio long, 4% short (AAPL), and the rest in cash (82%). The cash level will stay high until better setups emerge, regardless of whether that means long or short.