Wednesday, September 30, 2009

How the other side lives

There's always the time that things are different, so I can't hold conviction - but it seems to me there are still too many good leadership growth charts out there to be consistent with a market about to implode.

Check out TK's video tonight for a glimpse at how the other side is thinking. I have only respect for Tim and this is no pissing contest, but I'll briefly present the other side.

Right now (two weeks from now I don't know) I could post just as many powerful charts of new growth leadership as Tim can post laggard old-leaders that have rallied now to strong resistance and look like juicy shorts.

I won't make a speech (ha!) and I don't have the time now to make a lengthy argument, but from my experience there are never so many great leadership charts en mass (like now) when the market is headed for imminent, lengthy trouble. At the same time I would argue there are numerous occasions when there is a large host of ugly charts and the general direction of the market is not so phased by them. I'll keep the emphasis on the hot-money trends. Not every ridiculous shoot-the-moon penny jam, but within the realms of quality.

When the insanity stops, then so do I. And things can change quickly, obv.

And (more speech, sorry) as long as market volatility remains motive (which is clearly still the case at this point) I cannot see the logic in getting ahead of the trade, as TK is illustrating himself as doing.

If I am on the wrong side, there may well be a day (soon!) whereby TK scores big and I am out-back woodshedded. The next day however, we would presumably be more or less on the same side (I should be neutral at minimum, if not short; given a dramatic break-down).

When the volatility dies, getting ahead and trading-less is important to maintain an edge, but for now isn't it easier to just keep 1-step behind and forget about when it should peak (since that point was illustrated endlessly by so many as far back as late March!).

Yes, it is necessary to be on guard and you have to be very astute at getting out of crowded theaters, but that is the risk of trading with the trend. I don't care about back-of-the-coaster old growth after it has been cut down - I'm keen to focus on the new forest as long as it is thriving. When we no longer have that, what's wrong with getting short then?

I've got the rest of my life to sell on the way down. But if this rally is going to keep pumping then I sure as hell am not going to miss it.

Speeches aside, futures are down .25% tonight and I don't really like the prospects of a gap-lower here. I don't want any bargains right now as we start October. I have a partial hedge now, but I'll be hedging with abandon and selling my weaker names if the Nasdaq, Russell and/or SPX trade below last Friday's lows. At that point, if we only worsen, then I'm serving coffee to bears, selling more names, getting net-short and putting wax fangs in my mouth from then till Halloween.

If we rally firm tomorrow (somehow), I'm letting go hedges.

Easy game.

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