Trader Scott’s Market Blog
As also stated in this previous post, I am terrified of the complacency in ALL markets currently, some more so than others. This complacency is occurring thanks to the opiates being administered by the brain surgeons at the global Central Banks. (That metaphor actually works this time.) Anyways, we know that this complacency is a toxic situation. But the recognition of complacency, like having hope for a losing trade, is not a strategy for making profits in markets. Specifically, for the stock market, I am waiting for the next large selling wave. If, and only if, the volume characteristics of that selling wave warrant it, I will then be patient and sell short into the ensuing rally. But, ONLY if/when the market trades back/above the RESISTANCE ZONE. Meaning when the market is supposedly “breaking out” higher. As I’ve stated many times, I love shorting when a market is “breaking out” to new highs and I love buying when a market is “breaking out” to new lows. In other words, taking the other side of the trade. Just like the silver trade that I believed was setting up to “break below” support and set up a wonderful long side trade. That particular trade is/was called a SPRING which I wrote about here, (and I will update shortly). And also like gold and the miners last week “breaking below” support and then rallying straight back up. But let me categorically state – I do not enter a position and take the other side just because it’s “breaking out”. There’s much more involved than just that. It’s just a piece of my strategy to minimize RISK and also to maximize the PROBABILITY of a successful trade. And I never buy a market that is setting new highs, even when I believe that the particular market is in an overall UPTREND and has a high PROBABILITY of continuing up. In that situation, my brain does not compute, does not compute.
Below is an article from Zero Hedge in regards to my spiel above.
“Everyone’s On The Same Side Of The Boat Again” – Hedge Funds Have Never Been More “All-In”
Since February, “nothing else matters” but the $200 billion or so per month of central bank money printing and asset purchasing. Correlations across asset classes are at or near record highs (putting risk parity funds in grave danger) with global bond yields at record lows and stock prices at record highs. However, as one veteran trader exclaimed, “they all on the same side of the boat again,” pointing to the record speculative long positioning in US equities and record speculative shorts in VIX… a situation, he says, “can only end in catastrophe.”
Everyone’s “all-in” on the fear of not conforming to the norm… Buy Everything Stupid…
And the momentum chasing is just getting worse… As stocks go higher and vol goes lower, leverage speculative positioning is just chasing that trend adding to already record extreme positioning…
So to clarify – the “all-in”-ness of the speculative traders has never, ever been so high across asset classes – record short VIX futures (an implicity leveraged long trade), record longs in Dow and Nasdaq futures, and surging shorts across the Treasury complex (implicitly a long stock trade if ‘norm’ correlations revert)
What could possibly go wrong?