Market Before The Open - Wednesday 13 December

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More Hateful Up Moves

The more the market goes up, the less happy folks are becoming it seems. This is a function, I think, of people convincing themselves what the market "ought" to do based on preferred factors of their choice, rather than what the market is actually doing, in clear sight on stock charts all day every day. I continue to believe that the way to play equity indices is to stay with the trend until it changes, then change one's positioning a little after the trend changes. Right now personally I am very net long indices. I have small, underwater short positions. If the market only ever goes up, this will work just fine; the leverage through the 3x long ETFs means my positioning will continue to outperform the indices despite the modest drag from the 3x shorts. The risk I am alive to is not winding on shorts at the right time to catch the next downturn, whenever that may come. In 2023 my personal errors have been on the short side, not the long side. Underwater longs have looked after themselves in the end, they just required a strong stomach and/or hedging. I have been, as I have documented in these notes and in Slack chat, wary of trapped shorts in this bull market. This is true anyway but I hurt myself by hedging the Nasdaq too early in the March to July move up (I got the benefit of the long side but the gain was hurt by too heavy a short hedge); then selling that short too early to realize a loss (should have held on till the October/November 2023 lows, which would have delivered a nice gain on the short side!). In the July to November drawdown I should have used shorts more but I was constantly worried about the market ripping upwards - as it has since November - leaving those shorts out of the money. It's been a very strong year for me despite the errors on the short side, and that's because I have let the longs run, and indeed added to them at the lows. For now personally I continue to look up, to new ATHs in at least the S&P500, Nasdaq-100 and Dow Jones. Perhaps in the Russell, though that index still has a lot to do to evidence that kind of ambition. Soon enough the market will reverse and that will be the time to be unemotional as always, letting shorts run and being wary of adding to longs. (Unless something fundamentally changes, one need not fear trapped longs if one is not over-leveraged and it is money that one does not need in the near term. So far in the history of US equity indices they have always taken out the lows and then made new highs).

Let's take a look at our charts. Before that a reminder of our two new channels that you can join either as an Inner Circle member - or indeed if you don't pay for our Inner Circle service, you can still join the Van and/or Gains channels, below.

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Let's Get To Work

Note - to open full-page versions of these charts, just click on the chart headings, which are hyperlinks.