The seasonally strong period that begins in November and continues through most of January is a difficult period for me to navigate. Many of the sentiment indicators I rely on simply do not work during this period. Often times excess bullishness can persist during this seasonally strong period without effecting the market.
We saw the highest reading in years on the NAAIM survey last week. Yesterday we saw the most call buying in over a year on the ISE. We also saw extreme call activity at the CBOE. During any other time of year these kind of extreme readings would almost guarantee poor performance going forward. But I have seen numerous occasions where these extremes don't effect the market at year end.
I have mentioned numerous times in recent months that I like to give the market the benefit of the doubt during these seasonally strong periods. Despite this I found myself a little more hedged than I wanted to be for yesterday's strong rally but still moderately net long. I do not plan to add to my hedges despite the negative signals my sentiment indicators are giving off.