I've been trading since '84 and I have never seen anything like the stresses on the financial system and economy that currently loom so large, the savings and loan crisis was bad but it pales in comparison to what potential threatens the US markets today. Thanks for reminding me about earnings ByLo, analysts are going to start lowering expectations by 10-20% for the second half of the year but considering all the macro issues out there to worry about earnings are the least of investorâ concerns, that is an indication of how removed from normal times we are. Stocks are no longer trading on intrinsic valuation and the potentiality of their business model but rather on whether the system looks like it is going in to a death spiral or not (hence the major market moves on nothing more than LEH survival/next BSC rumors this week).
Despite the VIX volatility is significant and making macro prognostications is all well and good but plenty of money can be made on these large swings easier risk and trade management than trying to stick with some major downtrend through prolonged counter trend rallies(look at Market surfer's journal to see how that doesn't work unless you know how to hedge your core position or have deep pockets and balls of steel to match, not to mention a masochistic love for the pain of a significant drawdown). Overall I have been bearish since mid 2007 but there is no way I would have been able to hold that position with any significant size without being able to hedge. So while knowing what you think the macro picture is is helpful, especially to be on the look out for good setups and in the right markets/instruments, and to gauge where to sell some bear call credit spreads, and as a guide as to where to take profits on counter trend longs, it is far more helpful to keep the macro prognostications as a framework but to change your mind on a dime as far as where the market is going tomorrow based on price action, significant levels, sentiment/news, and cycles and cross market relationships. What the market will do next month, next quarter, will reveal itself one tomorrow at a time.
LOL, oh good, since I didn't say which instrument I can always come back and find something trading at that level. Maybe the naz or gold.
The mighty position: Long dollar, short equity, short commodities. You know how to trade it (enter in rallies in direction of trend (the new not the old))
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For what its worth, one thing that always helped me is blend out news headlines, blend out CNBC, blend out anything that others say and strictly stick with my trading discipline. Come Monday is just another day. Just like last Monday and the one before. I won't do anything different and trade it day by day. I personally (and this is just my experience and not a recommendation) found that trying to adjust my trading style or net long/short exposure by the bearishness or bullishness of news or headlines brings more adverse than positive effects on my bottom line over time. The human brain unfortunately is wired to panic with the herd, not against it.