A quick follow up on this weekend's summary, below is the chart of the S&P 500. For now I've lightened up a lot of the short exposure (index and sector ETFs) as we've come a long way in a short time. Literally 15%+ of a drop in 2 weeks through yesterday's close. Talk yesterday that this was the worst February ever on record if we ended the month here, etc. I still am uncomfortable by the fact technology and healthcare only had 1 really bad day (yesterday) and still uncomfortable by any bounce off 741 that is "so perfect" as we had this morning. But I know this market is dominated by computers (program trading and quant funds) that play the percentages so of course they are buying off the "double bottom" with November 2008. I also know people like to run up the market near month end so I'm open to anything here; in fact leaning bull for a short term bounce.
My game plan is as follows - the new primary range is S&P 741 to 783 - in that space I'm ambivalent. It will be a bunch of daytraders and hedge funds coming in and flipping things and selling you songs and thesis about China recoveries, the double bottom, the government will save us blah blah. All white noise to me. Then a very small sliver just above that (if we get there) is 783 to 800 - 800 was the "floor" we held through January and early February.
North of S&P 800 we have room to run to S&P 830s to 840.
South of S&P 741 we get our dark side exposure on in a heavy way.
I'm uncomfortable pressing shorts here until we break that S&P 740 level, since so many individual stock charts are completely destroyed and are nowhere near any resistance level. We've escaped unscathed during this awful month so I'll be happy to catch part of any bounce and we'll play it from there. At this time, if we bounce to S&P 783 I'll see how the market is acting at that time - but if this is just an oversold bounce that would be a good place to start layering back in on the short side.
When/if we bounce all the serial bottom caller will be back telling you "I told you so". Ignore them - they're accounts (if they listened to their own advice) are down 50%+.
Once more - this bounce off November 2008 lows is "way too convenient" to me, but we'll see how it goes. I am not going to be buying much long exposure for now - just push out the shorts for a while and get them all back below 741 if this is Lucy pulling the ball away from Charlie.
p.s. I'm adding another layer onto my Ultrashort Financial (SKF) short adding to yesterday's initial purchase - doubling the stake to just over 2%. (in the real world this ETF is very hard to locate to short - but one advantage of a virtual account is its not) ;) Again, Ultra Financial (UYG) is the same way to play this trade without any issues of locating shares.
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