Well, my theory just went out the window.
I fancy this market to be in plunge mode now, all thanks and praise go out to the FUCKING Spaniards and Guidos for that. What is to discuss? Yields are simply to high. Money is being hoarded in well-to-do nations, as represented by negative yields in 6 countries. This doesn’t have the look and feel of something I want to test out for an extended period of time. My guess is that many traders are approaching this market in a similar vein, waiting to see if we bounce. The problem with waiting is the 2nd leg lower might be worse than what you see now.
We know the central banks will not allow the system to fail. We also know Bernanke is ready and willing to start QE3, if we are in dire need. So, having said that, shorting the market is out of the question. The only course of action, frankly, is to raise cash and wait for an opportunity to use it.
My cash position is just under 20%. I will most likely up that level today, not to be hypocritical about my previous bullish stance. Instead, I view my malleability as the primary reason I am still here today, successfully managing money because I ceded to the demands of the market in the past. There are battles to be fought and wars to win. Sometimes it’s best to spectate and let others step on land mines or get eaten alive by rabid wilder beasts.