Monday, May 4, 2009

Change of Heart

After today's avoidance of disaster via key hedges, I am probably not going to re-enter new short positions tomorrow. I will stick with my current holdings but will sell off the calls and puts that did so well for me today as hedges, then just sit tight with what I have in SRS and SDS and EEM. I want to see if this momentum can cause a capitulation and run every short of of town.

Or, I want to see if we get confirmation that a reversal is in order. I will take today's action as a blessing and play even safer than I have been. April was a brutal month for me and even though I had hedges, they were not near what I needed to cover my losses. I am sure many of you are the same.

There is potential of a capitulative move up to the 950 area and I am not getting in the way. If the market gets to 930, I will be jumping in with short positions. But until then, I am staying somewhat neutral. The key right now is shorts are getting fearful which is a sign the end of the run is near. But I want to see the fear of God in the bears and then it is a sign that the run is truly over.

I expect a head fake in the next couple of days though. Perhaps a dip down to 890 which could suck some bears in. Max pain is what the MM's are looking for. I am not going to be part of that pain.

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