Hi marty,
Why short the market? I'm a day- and position trader of index options. I trade according to the charts, as well as taking into consideration more general factors like the state of the economy, where we are in the quarter, seasonal factors, the strength of the dollar, etc.
I'm short because, if you look at a chart of the COMPX, though it appeared that we saw a low on Friday, it was not on high volume and it did not meet the recent September lows (which tell me we have another low coming before we turn up more authoritatively.) Also, the 200 day MA and 50 day MA's are about to cross, which is short term bearish.
It appears to me that the recent strength in the Dow is more a case of people moving out of tech stocks and into "safer" old-market cyclicals because of fear rather than out of a belief that these will be solid long term investments. And finally, Hahn made a very good point in his market commentary last night (it's a pay site to which I subscribe) that, in the long run, prices follow earnings. Companies are now significantly reducing their earnings projections, partly because of the post-Enron focus on accurate accounting of GAAP net income. This makes it likely that prices will fall over time to meet the reduced earnings.
Great post, Marty.
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