Climate Check July 14

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  • on July 14th, 2011

After 72 hours of a wild but essentially flat $ES_F market, it looks to me like the bears are taking control.  Not only did we fail to hold rallies on each of the past 3 days, we’ve lost just about any stock or sector that had a chance to grab a leadership role.  I assemble this info towards the end of the active post-lunch session, so time is left to fight back but the last few rounds are increasingly going in the bear corner.  That 1320-ish level on $SPX that has acted as a magnet appears to be turning into a repellent to lower lows.

As a trader, it feels like we’re already low after the past few days.  As an investor, it feels like we’re kinda high after the past couple of years.  Therein lies the rub…we all have different motivations and therefore timeframes.  This evidence is used to protect me from my tendency to fight the prevailing winds a little too early; a lot can happen in 1-5 days.  I had considered this a short-term pullback within an intermediate-term rally, but with 72 buyables to consider against 63 shortables that’s not really the case.

I’m surprised at the continued deterioration, but was equally surprised by the persistence of the June 27-July 7 rally.  Let’s just say an evidence-based approach works a little better than my gut on keeping me from calling highs and lows.  I personally can’t stand this market; I like slow uptrends with sharp selloffs and the past few weeks have been the opposite.  Feelings aside, my job as risk manager says to keep my hedges on until the deterioration stops…when & where that will be I have no idea but I haven’t seen the evidence yet.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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