Come on Hoofs--show these men of will what will really is!
They got little hands, little eyes
They walk around tellin' great big lies
They got little noses and tiny little teeth
They wear platform shoes on their nasty little feet
I hear ya Randy...although I'd argue that short people have LOTS of reasons right now--it's just a question of timing. I'm not going to suddenly rationalize the world because I'm leaning long--that would be silliness in the first order! I'm simply a bear in bull's clothing and I'm taking the other side of the pervasive negativity for a trade.
A survey of my crack option coverage indicates that the short base, on a scale of one through ten, is about a 7. That's fairly lofty and, coupled with the VIX (north of 40) and VXN (up 4), it's starting to indicate the type of fear necessary for a trading rally. No, they're not extremes yet-- but it's a step in the right direction.
On the flip side, Boo just walked by and kicked me in the shin! He wanted to make sure I pointed out to my fellow Minyans that the breadth troublesome (9:5 negative), the dollar is flailing, crude is up again and there remain unknowns in front of a three-day weekend. Thanks Boo--now go bother Fokker, I've got work to do!
Option desks are starting to chat up the large open interest in the S&P 800 line as a potential magnet for next Friday's expiry. I can't argue with that thought, but I would point out A) that's a world away and B) there's chunky open interest in the 825 line as well.
I'm being very careful to remove emotion from my process and remain lucid during this tough period. I've been fading rallies for a while and yesterday's switcheroo MAY be a tad cute (or early). As I've said, good traders no how to make money and great traders know how to take a loss. If the time comes that discipline dictates unwinding some risk, I will no hesitate to do so. However, as it stands, I'm sticking with Hoofy (and my defined risk upsides) and have two legs in my metaphorical bull costume.
As always, I hope this finds you well.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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