iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,492 Blog Posts

Closed Out Hedges — Ready for Ze Pomp

I spent the whole day finding reason to hate the market. I discovered carnage amidst numerous sectors — dozens of stocks down 15%+ the past week. It all looked very bleak, as if the world were about to end. I’ve felt this way countless times during my trading career. Things always felt bad before they got real good. You never get a sneak peak into tomorrow’s tape and more often than not the ugliest closes leads to a ripper of an open.

Set aside the news for a moment. This is the way price action behaves via human behavior.

We trend follow and when it stops working we grow obstinate until we cannot hold out and then we sell. After enough selling, we panic and sell more and sell short. Two out of ten times these bouts of panic precede actual bad news. We saw this during the COVID breakout, 2008 financial crisis, and all the way back during the dot com collapse. But more often than not, short term squalls are met with flush outs and rippers to the upside.

So I did what I didn’t want to do most: I closed out my shorts, bulked up on longs, and will now wait for markets to punish me. I closed down 49bps mostly due to being impatient with a large $UVIX position that I closed out this morning. I do expect markets to open lower and might use my 22% cash to either hedge or buy more. I am, however, reticent to short into this hole — knowing full well that once the psychology of down stocks breaks up there will be a fierce buying frenzy to the upside.

Understand something, this doesn’t make me bullish — but merely a greedy man in search of bounty — attempting, if you will, one last gambit on the upside before it all comes crumbing down on Joe Biden’s fucking head.

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One comment

  1. 2 wheels

    Markets will bounce soon, the indices are oversold. But today was not the day. Dry powder ready

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