Is the turn I’ve been waiting for finally happening?
The market has continued its downward trend that it started last week. The broad market was down almost 3% today. This looks particularly bad when you compare it to the uptrend we have experienced. Are people finally waking up to the fact that markets should not run up 40% in a few months? There is a saying in trading, don’t fight the tape. It was one of the reasons I could not get more short the market as it ran up and up. The market wanted to rally and I had no desire to stand in front of it. It is what makes it so hard to short this market. We had such a sustained run up that shorting now could be suicide.
I’m not sure I would short from here. If I were to short from here, I would get in and out quickly. Take a quick 2 or 3% gain and get out. I would look to buy more things 10 or 15% down from here. Just depends how violent the moves are down. I’m very interested in inflation bets. Buying commodities and selling treasuries. Commodities will go down as people worry about demand for them if the economy tanks and treasuries will rise as people look for a safe place to put money. But the long term outlook for this trade looks good which is why I would want to take a position if the market sells it off in the short term.
If I am going to short I’m going to short even more the real estate sector. I still think commercial real estate is in big trouble. I look around my city and downtown L.A. and there are empty buildings everywhere. This is going to get worse before it gets better so I don’t see any relief for this sector in the near term.