It’s Now a Long / Short Market Again

I’ve been adamant for months and months now about the fact that this was a long only market, it didn’t pay to focus on the shorts side, it was just so hard to squeeze a few pennies out of a short as opposed to going with the path of least resistance which was up, in just about everything.  Shorts were masochists, participating on that side just for the pain.  Notice though that I didn’t say bears, I said shorts, the bears are all but gone, maybe Chanos is the last one left.  It’s now time to get nimble and rewire your brain a bit, we have entered into a phase in this market where it makes sense to be taking both long and short positions, this is no longer a long only market.  I have not participated on the short side during this recent dump, and only at the open yesterday did I take my exposure in the momentum book way down.  The market needs time to heal and base out, maybe even puke a little more.  We are still very oversold and should see a short term snap back at some point soon, but markets have a way of confusing the most people, and a continuation downward in the form of a slow bleed just as we churned upward would be both confusing and frustrating to most right now.

As I said, we have been conditioned for the past 6 months that this is a long only market, rewire your brain in a hurry.  I’m not saying this is the end to the rally, nor am I saying we are going to fall off a cliff soon, but the psychology of the market has changed and it is allowing shorts to make profits instead of squeezing every last one.  Remember my post on bearish patterns resolving bearish, well they have, for the first time in a long long while.

Everyone gets calls wrong, and my materials call was wrong, for the time being, I felt some pain but have exited those positions.  I’m not sure we can rally without the materials sector which is heavily oversold now.  Tech is lagging big time, they were the old leadership, they were extended, let’s see how far they need to fall to find support.

It’s time to get back to playing both sides of the ball, be flexible and open minded as to where this market can go, it’s now a long / short market again.

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