The market has now ripped the face off the shorts with about the same force as the last correction in October. We are now 13% higher than the lows just a little over a month ago. I figured the shorts would get punished again but I was only expecting a run to about the 200 day SMA or about 2025 on the S&P at the most. I entered heavy short just after the FOMC meeting (I had some small option positions from just above 2000 previous). Most traders who were bearish just a few weeks ago are now all out bulls again. From a contrarian sentiment indicator I would say that is good for the short crowd. But the Fed did cave and basically said they will never raise interest rates again, so you could see how the logic could propel those bears (now bulls). The dollar has been crushed - which is good for commodities - which is good for stocks. But the overall picture has not changed as stocks are overvalued and the world economy is in the can (exactly the reason every central banker is pulling every trick out of their hat). I do have the voice in my head that is saying something about not fighting the fed (again) and that voice does need to be respected. So I will tread lightly here.
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The market has broke just above 2000 now on the S&P and there is some technical resistance at this level. However, the market probably pops even higher here to burn some more shorts - maybe taking us all the way to the 200 day moving avg. So I am just entering some small option positions here and will add as we most likely break higher.
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Paul SaadSenior Manager, Paul Saad and Associates, LLC Archives
May 2020
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