Lopsided Sentiment

Sentiment has become so lopsidedly bullish that I am beginning to think that a 10% correction is a matter of when and not if. Whether it be sentiment surveys, activity of Rydex traders, option activity or anecdotal sentiment all evidence points to the fact that investors are complacent. It seems that the bears are non existent.

Yesterday, I increased the beta of my short portfolio, while my longs are primarily lower beta defensive stocks. I am tempted to move one step further and start betting on an outright decline. I could see one more move higher in the early part of January as traders return from vacation. They are likely to return in a bullish mood and that could lead to one last push higher. That is somewhat tempering my enthusiasm for the short side. If we do see a move higher in early January I will likely start getting aggressive on the short side.

3 comments:

Anonymous said...

nice call on spg!

Anonymous said...

does the TBT trade you did seem to easy?

Tsachy Mishal said...

Im not sure what you mean by that?