Late to the party? - No worries - you haven't missed much

2014年11月14日

Since October 31st (Halloween) up until yesterday November 13 there have been 13 days of which 10 of them were trading days. Since that time the market has been GRINDING higher. If you are a buy and hold type investor/trader then no harm no foul. However if you are a SWING trader you may feel like you missed out. Actually no you haven't. Sure the SPY has climbed an additional 1.24% (close to close) but nothing of any significance. Had you initiated a long trade you have to ask yourself if the risk/reward profile was worth it. Trading view has a great tool for that BTW when you are considering taking a trade (long or short). It comes down to return on investment as well. Putting your hard earned capital at risk after such a parabolic move to the upside for a paltry 1.24% return is a HORRIBLE risk/reward return to me .Now of course the SPY could have exploded further to the upside for lets say an additional 3-4% but the odds were GREATLY stacked against it. The move from the October 15th low up to the close on October 30th was 9.6% in 15 days of which 11 of those were trading days. It screamed of exhaustion. That is where I began looking for a price pullback from those quick gains. Although that has NOT happened - going LONG after a move like that was just NOT even a consideration especially as we approached an all time high resistance on DECLINING volume. I will say this - this market is resilient if nothing else and although a short position has not played out as yet and it may fizzle, the probability of a profit taking pullback appealed far more to me than going long on the gap higher back on October 31st. One last thing - should I get stopped out - the pain is minimal given the market is tired.

Its like showing up to a party and 3 am with a case of beer (I'm Canadian BTW - LOL) and saying "hey wheres everyone going"??!! Just when you initiate a LONG position , the market reverses on you. That's scary to me.

Again if you are BUY and HOLD .. you're solid (although I'm sure you were sweating during the 1st 1/2 of October) - if you are a trader and happened to catch this fantastic bounce (I did NOT) set your stops tight - odds are SOME sort of a pullback should be on the very near horizon - if one doesn't - kudos and enjoy the ride. If you are looking to INITIATE a new position, well - just think risk/reward and make your own decisions. I've made mine and am completely comfortable with them even though I have yet to cash in - that's what trading is all about. Trade what you SEE not what you think and I see exhaustion on every indicator I track.

full disclosure - I'm short synthetically using options - much cheaper that way for all us traders.