TRADING VIEW
Channeling my inner Zog:
Things I don't like..
Vix decline should have been more than today's 7.6% (10-15% would have been preferred)
HYG - Would like to have seen better performance today
IWM - Same as HYG but it's technical set up is better than SPY and is already at its 20d about to get on top
Volume - Today wasn't bad on volume at 115M shares on SPY but would have liked to see >140M
Breadth - We didn't clear 80% upside volume, came very close on nasdaq at 79%
Channel - Indexes have not cleared their downward channels
Lots of positives to look at as well but wanted to list some concerns, always about the weight of the evidence. Don't marry a view. I'm still in a stance where I could exit positions tomorrow based on what I see occurring. It's a very fine line of when to be patient and when to act when trying to trade this kind of environment and the one thing I can assure you is that it won't be easy. Tough markets won't ever give you a simple move. For example yesterday afternoons giveback and then reversal will have complicated today's move for a lot of traders. Bulls who dumped out to bears who took it as a short.
I ignored it because I looked at the weight of the evidence and today I made $15,000 for my trouble. Unless you really want the learning pain of these conditions I would not be doing a damn thing in this environment. This is not a market for dabbling. I do rather well in this climate but even as much as I enjoy this, it can be stressful because it requires being on top of my game and hammering discipline as to not slip up and even with that realizing it can trap you. Eventually we'll be back to a market so boring I can play video games occasionally glancing at a chart and make money and be longing for more excitement but for the intermediate future that is not in the cards.
It appears likely this rally could challenge the 20d ma but I'm still rather agnostic to maybe slightly tilting bearish on it's ability to clear.
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Maybe 2018 correction is a good template. We would be around the blue arrow, maybe that final awful swoosh is needed. Maybe it's just a bit too on the nose for bears wanting the easy play.
INVESTING OUTLOOK NOT TRADING
I'm always cautious taking a bearish tone because I don't want people to act drastically. There are some concerning things. I do believe we are in a secular bull expansion, that is the backdrop. But it's imperative to look at the weight of the evidence and the chart and data in front of you and trend is weak right now and looking vulnerable. If the market can't defend this level that is a concern. I do think we could overshoot to as low as 380 but if did that and failed to get back over the 20 month avg then it doesn't matter my feelings on the secular trend. A bullish expansion can challenge the 20 month average and it does indeed lose it regularly but that is absolutely pay the fuck attention time and if the market does not rebound strongly and recapture then it may be time to sell even at hard losses.
I've said this before just like to repeat it, I will never chicken little a sell call. I don't jerk off to zero hedge articles. To capture the lion share of what a bull market has to offer you must be willing to suffer some very hard periods and some really ugly red screens. You should always get right with god and understand that if there comes a day to sell it won't be at some top it will be 10-20% down and you only sell down at that level because the weight of the evidence is a 45-60% drawdown. Declines that take years to recover from not months. Depending on your time frames even gut wrenching bear markets can just be sat through, accumulate what you can and wait them out.
So super long post to say...My OPINION is that if we lose 400-410 range in the coming weeks people should lighten up, if we drop to 380 without a strong and instant bounce with a clear breadth thrust then I'd go even more to cash. IF the market would play us with a fake out you must be willing to get back long if the trend recovers, that includes having to potentially enter higher than you sold. If you feel you can't do this emotionally then you really should just not make a move. We all have lived through one of the steepest declines in history just two years ago. A decline that just ripped through every support level like it was nothing. This recency bias can have people on edge we all know what's "possible", but to make money in the next decade we can't hide in cash always fearing the next covid plunge. Take it a day at a time and if you aren't willing to sell down 15% or if you don't think you can handle the move out and back in that may be required then it is in your best interest to turn it all off and just let it play out rather than risk fucking it up worse by taking action.
