I have been asked numerous times why I am not heavily short this market given that my big picture view is bearish. There is a saying that in a Bear Market nobody makes money. Not the Bulls and not the Bears. I believe there are a number of reasons why this is the case. The prime reason is that the most vicious rallies occur in Bear Markets. During the 2000-2003 Bear Market there were multiple rallies of over 20%. If one pressed their bets at the wrong time the consequences were disastrous. At the same time a Bear is not immune to the temptation of trying to catch a falling knife or two.
The way I like to play a Bear market is to wait for extremes. During the rally in May everyone got bullish and the Bulls started to overplay their hand. All the indicators showed it whether it be option indicators, overbought/oversold indicators or sentiment surveys. That never happened during the rally we just had off the July lows. While I readily admit that we probably put in a top for this move and are on a new leg down, jumping in here is just not my style. I don't like to chase moves. There will be other opportunities. While I do have a small short position that I put on a few percent higher, it is relatively small. If we do get a rally into the election I will be in a position to use the strength to get short, instead of getting squeezed.