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I must say, I wish I could be having more fun given the run the market has had over the past eight trading sessions. Right now, trading this market is like going out to party with girls who were the AP Physics types in high school. You feel like you are ready to have fun, you’re out on the town, but there is something off about the whole predicament as you are partying with a bunch of pompous dorks. To be aggressively long right now in this market is akin to partying with those nerds.
Rather than aggressively riding the rally, or stubbornly averaging into short positions the whole way up, I am playing defense. Mind you, I am not playing Buddy Ryan type of defense, where I push the offense BACK three yards every play. No, I am playing the bend-but-don’t-break defense, with a heavy cash position and some select longs, along with $SRS as a hedge.
We are now at the very top of the multi-month trading range. Although many are anxious to call for a top here, and are cherry picking certain aspects of the price action to support their desire for an imminent reversal, I am seeing no such evidence yet. If this, indeed, is going to be a a major inflection point where we rip out of the range up to 1150 or 1160, then I will first and foremost not get caught in the tide. Beyond that, I am admitting my willingness to miss out on some of the profits on the long side, until I see better entry points into less extended charts.
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