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BTFD Conditioning

Joined Mar 28, 2014
35 Blog Posts

The markets have changed in character.  The BTFD crowd is having to deal with recency bias this morning year.  During the market run-up every pullback saw immediate investor demand to get “in”, resulting in a rapid V-shaped recovery.  Once the market bounced everyone chased it higher and higher.  Now, much like Pavlov’s dog, everyone is conditioned to buy the dip.

Notice your own conditioning.  

conditioning

Being net-short I have noticed that I’ve been extremely fearful of a rip-your-face-off rally (due to my own conditioning).  However, we have seen a consistent amount of supply hitting the tape this year during setups that until recently would have led to multi-day rallies.

This is the sign of the bear.

In my opinion it’s time to put away the toys like the FANG stocks, or the Biotech names; use them for speculation only.  If you’re not into shorting, it’s time to play the capital preservation game.

Shorting has gotten a bad rap lately; I’ve heard commentators describe ‘how hard it is’, and how ‘it’s a losing game’.  Give me a break.  Learn to use options so that you can only lose what you have put at risk, then give it a go.  At the very least you can employ an inverse ETF into your portfolio when the S&P 500 breaks under it’s 200 day moving average on a weekly closing basis.

The bottom line is that you should have noticed a change in how the markets are trading.  The typical setup over the past few years is no longer working.  Notice your biases and trade smaller until you have a feel for the market.

If the S&P 500 cannot get above 1,950 we are in a bear market.  I hate how it sounds, but that’s my “level”.

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2 comments

  1. probucks

    looks to be having a notably hard time rallying….

    Like uncooked pasta – Nothing’s STICKING!

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  2. nocturne

    Been buying dips …..

    …. in TZA, DUST.

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