Comments/thoughts for Pokersam (and other near-term bears)
PS, as you know, I am a fan. Frankly, I've had many concerns about this economy for a long time. Perhaps I am jaded somewhat by my own personal situation, but that is a story for another time. So far, I've been proven wrong about the economy... dead wrong. However, my concerns persist and for these reasons, I believe there is merit to the case you have laid out many times in The Bear's Den re market action going into December. Beyond this, there is something more basic: you are a better trader than me, so when you write something, I pay attention. However, let me attempt to challenge your short-term bearish attitude in a respectful manner. The worst that will happen is that, "I will be taken to school." Okay, here goes.
I again looked at the Commitment of Traders report this evening. After a recent peak of 42,157 net short contracts on August 19, the commericals have been getting long. In fact, tonights report showed that the commericals are net short just 17,671 contracts. It is written that the commericals are the "smart money" and that they usually are net short to some degree, just to hedge their positions. The fact that they have cut their net short positions in half within four weeks makes me stand up and pay attention. Now, I also understand that the commericals have a long-term view. However, why would they be willing to take the kind of loss you are projecting if all they had to do was wait another couple of months until the smoke had cleared?
From what I have read, the OEX options players also are considered "the smart money." The OEX PCR spiked a bit late last week and we did get a selloff in the market. Now, the OEX PCR is at a rather pedistrian level, which tells me this group sees little to be worried about short-term.
Now, I am fairly new at all of this and I could be intpreting the data incorrectly, or perhaps not as efficiently as a more experienced trader. However, with everything we do, trend is important and the trend suggests market conditions may be improving in the eyes of the "smart money."
Having written all of this, my models (I use mostly weekly charts to catch intermediate trends) are a rally or two away from becoming overbought, so I do believe a correction is in the cards. I'm just not sure it will be much more than the 5-7 percent we've been getting during the past two to three years. On the other hand, there is the matter of seasonality and we still are in a weak period, so anything can happen, I suppose.
Anyway, these are my thoughts and I welcome your comments to my "arguments." Many thanks, and have a terrific weekend.
Rich
AI
