Still Don't Want To Short

In my earlier post I outlined why I believe it pays to err on the side of caution and why I believe we are likely to get a better entry point in the coming weeks. That said, I am still not thrilled with the idea of trying to short this market either. Hedge funds have de-risked and if they decide to re-risk because of a perceived Republican victory or a perceived year end rally the market will likely go significantly higher. The performance anxiety is percolating.

There is also the possibility of a mega merger wave given high cash balances at mega cap companies and record low rates. Additionally, I have been burned too many times on the short side heading into the New Year to not respect the seasonality. That doesn't mean I am unwilling to short heading into the New Year but it does mean I am extra careful.

10 comments:

Anonymous said...

Uhhh this is mid sep and you are already talking the end of the year. If you refuse to short in sep oct you miss the worst month of the year and the month where major crashes happen. If you make this comment on Nov 1 than I can understand...

Chaos! said...

Republican victory is likely priced in. Any pop due to that will be a great entry point short. I agree that the coming supply is daunting, but never succeed betting that we'll reverse trend before an expiration. We're probably ok thru expiration. I'd love to see them break out above the signifiant overhead resistance cause it would swing the sentiment to bullishness. That would put the top in.

Anonymous said...

Hey CO,
Happy New Year! When does going against the grain become the wrong thing to do. Check out Art Hogan on yahoo finance saying sentiment is too negative so market will continue higher. The headline is saying go against sentiment to make money so maybe the right thing to do now is follow the herd! Sometimes when your right your wrong.

Tsachy Mishal said...

Anon 1,

1. Most year end rallies start in Sept or Oct. By November they are usually well under way.

2. I did not say that I am unwilling to go short, only that I am more careful at this time of year.

3. I am usually early because I look a little into the future, unlike most investors. Being early is far better than being late in my book.

Tsachy Mishal said...

Anon 2,

I am not sure exactly what you are saying. There are too many contraries in there. Can you spell it out for me?

Anonymous said...

Tschay, I've been reading your posts, and you are never a position trader, you micromanage trades to the hour. Since when do you look out 3 months out.

Tsachy Mishal said...

Really? Because the XLV that I sold today was bought on July 2. The remainder of my positions were also bought in July. I might have traded around them and hedged them at times but all in all coming into today my positions looked an awful lot like they did a couple of months ago.

Anonymous said...

You have commented several times in August that this economy in your opinion is slowing down and so will the market for the rest of the year. Don't flip now!

Tsachy Mishal said...

I still think the economy is slowing. But the stock market and economy are not the same thing. I am currently market neutral.

Anonymous said...

C'mon Tsachy! You reduced your Gilead position at one point and bought again after the stock had fallen 6% or so. Despicable micromanaging. If you had sold a second time a few weeks back around 35 and repurchased at 32, well, I would have nothing further to do with you.
Praguer