Wednesday, May 26, 2010
I hate scenarios. Primarily because they're a clear net-loser over time (-EV), but also because they inevitably become self-important; something not conducive to beating this particular game of animal spirits.
Still, when you get knocked over the head with something, you may as well keep it in mind; especially if you can remain committed to flexibility (the opposite of stubborn, self-righteous, self-important, typical loser traits, etc.).
Having qualified all of that (zzzzzz), here is the picture I'm going to paint (and run like hell from as soon as I'm proven an idiot). Don't think of it as a prediction and don't expect me to take credit for it next week, regardless of how exactly or not it plays out...
I'm getting a little bullish, though not exactly long-term bullish. I'm getting bullish for June, let's leave it at that. We're a few days away now from a respectable follow-through session (An O'Neil confirmation of a new rally). We'll see some amount of re-test (more than likely, but not absolutely necessary, depending on things like whether or not the Euro remains stable), but today should keep more or less firm to the close. Following whatever re-test, back-and-fill feel at lower, but not new-low levels, the rising-volume rally day coming out of that is where the patient traders who are not interested in shorting - should jump in and buy it up. That day may be as soon as Friday, but more likely would come next week, after the Monday holiday. Lower-lows, unless it is a gap and quick recovery back through such levels, means we're still in the shredder and all of this talk was just wasted space; widows and orphans should run far and fast from such a hostile market environment in that case.
I've lightened hedges considerably, for the time being, but I expect to neutralize again before all of this is through; thus accumulating longs for coming out of this, and then letting go the hedge on the follow-through day, once it succeeds in taking place; adjusting like my hair is on fire should the upshot of this post go terribly wrong; reminding me of why I hate predictions.