Timing Tops Is Impossible – Wait For Bottoms Instead

For all the chat about not trying to time tops or bottoms, actually the bottoms comments are unwarranted in the past few years. Timing bottoms is very easy, so far after 2009. You just buy. The average span of selloffs is measured in 1-2 months – not exactly the most trying of circumstances.

But trying to spot the top is almost impossible. The rallies have been so fast, so ferocious, and so long winded that any attempt to short them is simple folly. In hindsight, I would point out that the most severe broad market selloff in a century, beginning sometime between 2007 – 2008 and largely hitting its nadir in 2009, was an equivalent buying opportunity, in terms of raw patience, as shorting the two major rallies off the bottom, first in 2009, then mid-2010. And from 2011 the market has been hit with only ripples, that make it terribly impossible to short the indices.

Which is subsequently why I’m not trying to be short here. A healthy cash position augmented with some mild hedging is the way to go. I may be months early to the selloff, but am betting that at this stage, even foregone gains or some mild gross loss being carried is minimal next to the pain that could be experienced from overconfidence here. And the rewards from being able to buy a bottom are much greater than dumpster diving through whatever picked over scraps I can find.

Whenever we should get a selloff, provided it doesn’t carry with it ominous, new developments, I will then allocate some capital. And the 9th floor shall be all the better for it.