After a 1,000 point down move in the Dow this week I LOVE seeing people on the Twitters that they are sitting in cash. Are you f*cking kidding me! Cash is most definitely NOT a position this week. You should be bathing in all the coin you banked this week.
I get it, unless you came into the New Year short (which you should have) it was a little tricky early in the week.
Monday: Daily Hammer and we close on highs. Definitely tough to hold short, and a good spot to test longs even.
Wednesday: THINK OF THE PSYCHOLOGY here. If everyone is testing new longs over the last two days, and we gap lower — we now have a HUGE participation group on the wrong side of market direction. At this point it is time to test shorts gain.
Thursday/Friday: You’re right – press your damn shorts. Stop sitting around in “cash” because you feel safe.
From a trading perspective. The market over the last year or so has been slow and basically trendless – not my forte for trading. My thesis’ take longer to play out and may reverse and change my opinion quickly. But, when you get that glimmer of volatility (August, and now this week) your skills get put to the test. If you don’t make money during these periods, you need to re-think your process. Social Media is LITTERED with traders that panic during volatility – which astounds me. Volatility is your friend, not your enemy as a trader.
My advice going forward is this:
SPY short-term low target is 189 for next week.
The market will NOT crash. This happens when no one is ready for it.
It’s NOT time to press all-in short anymore (yet). The market will re-set up again (to the long side or the short side). Patience.
Yes we will bounce, yes it will be trade-able. Longs should be a one-night stand, not a long-term relationship.
The best traders stand out in these periods of high volatility. Find them (@varelresearch and tons of other traders here at iBC) and learn their processes. The opportunity this week was AMAZING.
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Yes… great post.
Thanks!
I personally like long vol as opposed to short the market, but trading is all about comfort so if somebody has a good strategy and discipline going to cash during downturns then more power to them.
Volitity trade is where its at right now.
I see what you are saying, but unless your time horizon is >1 year – you should be actively trading this volatility. This vol is rare and, with a sounds strategy (which is even rarer), you should be killing it.
Nice post! But, hopefully you got stopped out from the I bought the lows post?
Oil lows
Haha yes most definitely – was stopped out within 3 sessions.
I am so very much looking forward to this week. It will test the validity of my chosen Twitter follows and blog follows. Your description above the overwhelming theme of both. Can the market follow this pattern if the majority of traders I am following expect this? If the market follows this pattern, than I should be set for a good 2016.
Such a refreshing post, new follow, exciting week coming.
Good stuff. Here’s what I don’t get about the constant reminders that markets crash when nobody is looking for it, though … how, exactly, would you have a “crash” in which 10% down, nobody would be looking for it?
Nobody, or very few, were looking for a crash right out of the gate to start 2016. We’ve lopped off almost 10% straight down to start the year in the worst start ever. If I understand you correctly, you say too many people are expecting a crash right now. What’s the scenario in which, in a situation like this, nobody would be calling for one?
To be clear, I’m not saying there is going to be a crash, but it seems like the same arguments people would have made in November 2007 or even January 2008 (market is still in an uptrend, this is a higher high, etc.). What’s the scenario where everyone is bullish and the market just crashes straight down with nobody expecting it?