Ride the Bull, Trade the Bear

It’s a great line, and it seems to be true at least in this market cycle. I don’t know who coined the phrase, maybe Livermore, maybe someone else, I don’t know.

The doldrums of summer are upon us and that could lead to a few outcomes: summer chop, a sell off or a massive light volume move to the upside. Two or three of the major bulge bracket firms, one of them being Goldman, is still looking for a major move from the market between now and year end. Bank of America hopped on the bullish bandwagon this morning.

The title of this post is true. My point is that the short side really only gives you a short window in this market. Sometime a few days, sometimes a couple of weeks, but then buyer aggressively emerge.

I play both sides, but  have made my money from the long side this year. Shorting just doesn’t work for more than a week, maybe two if you catch a correction, at least from my experience. That’s OK, the market is telegraphing a message. The message is that even though QE is done, we are still for the most part in a zero interest rate environment. The market is still “forced” to buy stocks.

There will always be walls of worry and corrections, and although Greece fears may subside for a short period, new issues always prop up. Let’s not forget the debt limit soap opera that will grow roots over the next few weeks.

Good luck in the second half and it’s always good get hedged on rallies.

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