can this really be the new multi-year bull market? there are some similarities to 2003 when SPY kept getting more and more overbought but kept getting higher and higher. notice that based on the overbought levels we may be somewhere in June 2003 (attaching the charts in the next post). 2003 run-up was accompanied by a major VIX collapse just like now. 2003: NOW:
Short-term I am bearish because we are so overbought in the background of the bullish sentiment (no wall of worry). I have ton of shorts that are underwater and the sinking feeling in my guts that this bull can't be stopped. Based on my past history, this combination invariably indicated a short-term top within days.
As soon as you cover your short positions, because you can't take it any longer, the market will plunge.
This is absolutely correct! Here's how you get around it: Open a second account and go long everything you're short. Put in .10 stops on the long positions because as soon as you're long the market will turn around big time, stopping out your long positions for minimal losses and finally bringing your short positions back in the money. In the unlikely event the market continues upwards, your short positions are now hedged against any further losses until people finally come to their senses and realize that companies can't cut costs forever and profits can then only come with growth. Keep in mind that 2003 we had a war to grow on, and unlimited credit for anyone at anytime to promote spending. I used to get 3 or more credit card offers a day in the mail, two different banks gave our business $75,000 credit lines without asking a single question (our business was quite unprofitable and had been for some time), and we were able to refinance our house that had doubled in value with a simple questionnaire and credit check. Those days seem to be temporarily on hold...
typically, i will eek out a small profit out of this type of adventure. but i often question if it is worth it.
What I don't understand, and I say this in all seriousness, is why many, many folks (some of whom are already short and have been for awhile) constantly bring up the same old mantra (s) -- market is overbought, there is no logic to further price appreciation, etc., etc., etc. So what? Who cares? Why even use this kind of reasoning in your trading decisions. The market is going to go where it wants to go. Reason doesn't matter. Why fight it? Why continue to lose money hoping (usually against hope) that it will turn around and go the way you think it should go. I just plain don't understand... This kind of thinking makes no sense whatsoever.