Declines happen much faster than the ascents. If you have your largest bet on at the top and then are reluctant to sell because you're waiting for confirmation of a trend change, you're going to get screwed.>
Excellent, excellent point. Tops are strange because the moves get parabolic and wild and the gains seem easy, making the participants throw all caution to the wind. Even rational non-Humpty Dumpty types get careless and sloppy at this stage. Plays (cheap puts) that would work in a sudden, dramatic blowoff reversal, aren't even considered (*).
No asset class is immune from it either. In the case of gold and energy (and not to just pick on these) it is very important to recognize that there is a strong speculative bet on the even more liquidity playbook in place now. Based on my work, that's a highly questionable Humpty bet. Recent credit numbers suggest that a strong consumer/retail/financial fourth quarter just doesn't compute, would seem impossible in fact.
Message 21961091
There are surely downward revisions and so called negative "surprises" coming there going into reporting season.
(*) COTs on stock indexes look very bearish, with commercials have really ratcheted up their short positions. On the sub total they caught the big rally being long 42,198 on 10/25, they are now short 92,406. The big bets the commercials made on the bond rally, have been largely removed. They were long 292,853 on Oct. 25, it's now only 57,077. Remember it's not the raw number, it's the magnitud of change that give the clue. The 10 year COT is now bearish in my view. |
