I received an email from a (free) reader today asking where we have been the last couple weeks. I stated that we have basically been in cash because we did not trust the market. He advised that we "missed" the move and we were wrong. Our answer was...not really...as we posted..we closed our shorts and sat on the sidelines. We made no bet either way and advised clients to wait for better entry points. A "better entry point" can be at a higher or lower price. The key is- at a price where you have the highest probability of making money- not the lowest price. We figured in our emails that The Dow had an outside chance of approaching 12,000 because of a huge short squeeze..and choose not to participate in that move because the fundamentals are so poor ( it almost hit it yesterday). We certainly are wrong many times; however, choosing not to trade and not losing money is NOT being wrong. We continue to advise long-term investors not to buy at these prices or into this market at this juncture.
What now?
As explained in our email yesterday
We believe 12,000 to be the very top of the range and decided to short. We bought FAZ (3x short the financials @ 42.50 yesterday. We think the bank earnings with their DVA accounting is just horrendous. The momentum stocks are starting to crumble and the bank stocsk are in a very precarious position.
