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September 17, 2008

Head Fake City

At the risk of sounding repetitive: surprises in a bear market will be to the downside. Hence my refusal to take a long position despite yesterday's honker of a reversal. In fact, last night's post included the following paragraph:

"The thing that bugs me the most concerns the fact that, with the exception of the VIX, none of the oscillators came anywhere near the panic levels seen at other, recent bottoms. I'm wondering if today's reversal will turn out to be the biggest head fake of the year. If so, we should see weakness immediately. I'm not going to bet on it, though. The best course of action is to wait for a clearer picture."

Don't get me wrong here. I am upset at the moment for not having an aggressive short position, but the only thing a trader can do is wait for the proper setup. Unless we get another large upside reversal today, I'll start building my short position again. For those of you long metals, congratulations. Gold and silver are enjoying a monster day, and with today's rally more near-term strength can be expected.

Apologies in advance, but I will probably not manage another post this evening. A dear friend is in town from Ecuador today. I will be entertaining him at the local firing range and then at one of Atlanta's finest restaurants. I'll have to do my best not to keep glancing at quotes on my mobile device!


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