The market completed it's scripted bounce. We could have gotten cute and made good money on this bounce; however, we didn't have time to trade and decided to let it ride. Our short got stopped out with a 1% loss before the release of the Fed minutes. No biggie. When the media starts talking about correction and market tops, you know being short is not the right side! It was really close though...The markets had a close call with a severe breakdown...we are not kidding. The algo trading systems saved the day by doing what they do best- buying at support points. If those points were broken, it could have easily gone the other way. It was at 50-50 odds of a break going into 2pm. That's high odds. This is the second time this year that the bull market was decided on a coin-flip. When the flip doesn't land on heads, look out below.The funny thing is that Wall Street knows that earnings are going to disappoint (they lowered the bars on all their estimates), they know QE will end soon enough, and they know that valuations are stretched - why are they not selling? We think that they are selling. We can see it in damaged markets across the board. We will play with them....not on the long side. Buying just because others are buying is crazy. We don't mind doing it, it's just that a "snap-sell" can crush The Bulls in a hurry. We are in cash and will be attempting bear raids at all the resistance points. If you catch the right point, a lot of money can be made fast. Paul Tudor Jones (one of WSR's Hall of Fame traders) will attempt the same trade multiple times until it hits. That is our strategy. It is playing out exactly how we predicted. We are playing golf tomorrow morning and are hoping for some strong bullish follow-through so we can re-initiate possible short positions again. We are in no hurry. This is a great time to trade the markets. If you survive (there will be lots of blood), you can reap huge rewards;)
Prediction: Bulls will get slaughtered, Bears will get slaughtered, and Pigs will get slaughtered. The Fed does a great job of clearing out speculators (unless you are one of their favorites). They want most of us out. Many traders ,long and short, have taken severe hits the last couple weeks. When the carnage is done, the market will be ripe for huge profits. We love it!
What I would tell my father today- as an investor who held through the financial crisis up until now, it would not be unwise to sell here. The gains have been fantastic. There is no reason to risk waiting out another bust cycle or scraping out a few extra percentage points.
