We just cannot get this party started!
Every rally is getting sold into, much the way every sell-off was bought into last year. Is this a major change in sentiment as the “smart money” takes every opportunity to get out of the market or is this the “dumb money” being stampeded to the exits – once again at the bottom of the cycle?
Fear is certainly permeating the air and, as I have to keep saying to make our position clear, we are generally aiming for 75% cash with 23% positions that are hedged by at least 20% and 2% in Disaster Hedges that pay 5:1 so we “bullish” but it’s bullish and guarding against a 30% drop – which is more bullish than we were in May, when we were guarding against a 40% drop on our buys. Anyway, it’s VERY important to keep that in mind as we are picking up very long-term positions and we actually HOPE the market does go lower so we can buy more at low prices because it will be HARD to commit our cash to any rally that doesn’t get us over the April highs and we may have a LONG time to wait for that one.
So, we are having fun with short-term trades and doing our bottom fishing and, as I mentioned yesterday, we are now taking some upside hedges that can give us 10:1 pay-offs if the market breaks UP on us. That way, if we have 23% in positions that make 20% and even just 1% in positions that make 10%, at least we pick up about 15% if the market gets away from us. If we were more bullish, we’d make a bigger commitment but heck, we STILL are not at our weak bounce levels yet so caution is the way to go.
We need a catalyst to get us going just like the myth of infinite Chinese growth was the catalyst that got the markets through last year we need to sell the story of a US recovery overseas to now get those investors back in the water or we’ll be left swimming all alone with the sharks…
I was happy with the Beige Book yesterday and we thought the sell-off in the afternoon was BS so our last trade idea of the day was to grab the QQQQ July $45 calls for $1.08 and those will get us our 20% this morning but we’ll…
