I'd do that if the inverse was happening and I had longs in the red, but shorts are dangerous to hold too long, if markets melt-up, even if there is a 10% correction later, the short's entry price might never be seen again. My Shorts were entered in June around the old highs, I did not expect a surge of almost 1k pts (DOW) beyond these but it happened. My strategy now is to enter more hedges (longs) when there is a sell-off, these will be at staggered starting at -8% onwards, if the sell-off is greater than 12% then I'll be fine as the existing shorts can then close in profit, but if we can't get 10% or more then by marring the hedges losses will be less and the existing VIX hedge should cover the rest. I'm very seldom net short but this time i was and got caught out, but there is still a way to recover, I'll wait till month end then reassess. In the meantime, I'm off on a trip tomorrow, probably best for me not to see what happens till month end when I return. (I might return to a 40% correction and 6 fig profits, one can alway whish right?)
Returned after 2 weeks to more or less were it was when I left. Reporting season is half over and results are not as bad as were anticipated plus forward guidance is upbeat, however, most analysts tracking the individual components of the S&P seem to agree that fair value of the index is 2,940 to 2,950 so participants are currently overoptimistic. 31st July will be the Fed's decision, a cut is expected, what might tip confidence is what Powell will say thereafter and since the guy hasn't a clue on what he's doing, he'll probably make a speech that won't convince markets that the Fed has a handle on the economy. All considered I'm sticking to my view of a correction by Sep and a recovery to the 2,950 handles thereafter. I'm remaining short US and long EU. .
You went away for 2 weeks or more with no targets or stops? Jeez, at least have a target. Stop I can understand and appreciate not having for a swing/position trade. But you MUST have a target.
I have t/p targets and I'm 90% hedged so I can wait for the correction and sleep at night also. My worry point is if the DOW was to brake 29,000 without first correcting. 29k is the point where even if there is a correction, the shorts are unlikely to go into profit. At current levels I can recover and indeed make a sizable profit if things pan-out as was stated earlier i.e. US markets hover around current levels then correct by Sep before going higher.
Another day another record high, much like is was in 2018... a June dip then steady rise till Sep and then it all goes pear shape. 2018 can be blamed on Powell, if 2019 goes pear shapped again we can still blame Powell. No doubt he's learned a lesson and, in his ignorance, he's trying to do what markets want him to do, however, his 2018 policy error caused considerable damage which has been compounded by trade issues dragging on much longer than was expected. Let's also not forget that although Powell flip-flopped from hawk to dove, he's still reducing the balance sheet in the face of a slowing economy i.e. he is easing on one hand but tightening on the other. I trade the indices on fundamentals with longer views than day traders doing it on technicals. My view was formed after Q1 reporting and on following the Russell 2000 which is over 10% below the S&P but a better measure of the real economy, Q2 reporting is better than was expected but I believe the worst will come in Q3. Many triggers could cause a correction, the 3 most likely are: another Powell flip-flop, trade issues don't progress, pre Q3 reporting guidelines will disappoint. I've made a call for a sizable correction by Sep, so far I've seen nothing to reverse that call. I am indeed buying the dips in smaller contract than normal for me while biding time, but I remain net short US and net long EU (The EU has underperformed the US by 16%) waiting for the big one which could even see the Dec18 lows. Overall, the bull trend is not broken but IMO, a correction is on the cards as markets are overbought needing a flush-out to bring traders back to earth to reload their starships for the next blast-off.
I guess nobody is liking what Draghi is saying... DAX down almost 1.5% and the DOW nosedived 200pt as he speaks
whatever happened to the "efficient market hypothesis"? (https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp) If the hypothesis were true, as economists belive, markets should not be at new highs, yet they are with the notable exception of the Russell2000. I atribute this to the distortion of the indices created by the mega-cap companies. A handful of companies has grown to such a size that when they do well, so does the index boosting sentiment and making players complacent, a phenomenon not present in the Russell, so the Russell needs to be noted carefully. It is also to be noted that some of these megs-cap companies disproportionally influencing the indices are not being valued traditionally, so when the bubble bursts, these are the companies that could fall hard, perhaps not quite like when the .com bubble burst but at least to the point were they get to traditional value based on assets and profits rather than on projected earnings. JP Morgan is warning of a significant downturn possibly triggered by the Fed (when the rumour turns fact). And the strategist Sven Henrich warns of a VIX in high compression likely to spike 70% or more soon, a VIX explosion as he puts it. I remain comfortable in being net short in the US for now. My strategy will be re-accessed after the Fed's announcement.