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We all face risk as traders. No one knows what a day is going to bring (unless you are one of the big banks, in which case your profits are assured by government fiat). But for us little guys, we have to do the best we can with the tools and skills available to us.
The week ahead brings more risk than most weeks. I won't even go over what the risk events are; you've heard them all countless times. Suffice it to say that it's going to be wild, dangerous, and – at times – scary.
I wrote in the post last night about how I was taking a conservative approach, having gone long five ETFs as a hedge (DBC, USO, XOP, SLV, TBT).
Well, these hedge positions did the two things that hedge positions usually do for me. Specifically:
(a) Jack; and
(b) Squat
I lost money on all five longs (and did so pretty much instantly at the open). Sometimes I wish, as a bear, I was a pure bear. This "long" business is for the birds.
Between Sunday afternoon and Tuesday afternoon, I imagine most traders – bull and bear alike – had pretty much pulled most of their hair out. Huge up. Huge down. Huge up. The entirety of the Spanish drama has come and gone, and prices are pretty much where they all were at Friday's close. It's as if nothing happened (but a lot did happen in between).
For my own portfolio, it stands as follows:
+ About 52% committed to positions, the rest in cash;
+ 59 individual shorts, all of them small;
+ 5 longs, all of them ETFs, and all of them medium-sized;
+ A split of 70% short/30% long
As we are about 80% of the way through Q2, I am getting cautious about preserving profits. April was profitable for me. So was May. So is June, thus far. I don't want anything to change that!
Yesterday, while I was watching every asset class on earth explode higher, I was in Don't Get Killed mode. Given the fact that the bulls completely and utterly dropped the ball by this morning, I went back into the mode I greatly prefer, which is How Can I Make the Most Money.
In spite of that, I'm still playing it safe. I covered my large short positions, and I'm presently only about 35% committed with the rest in cash. I do have 20 new positions that are a single mouse-click away, which will goose me up to 50% committed, but I'm in Wait and See mode (who knew I had so many modes?) since for this particular moment – we might be shoring up for somewhat higher prices intraday.
The good news for me is that this whole Spanish Bailout was about as hugely successful as the Facebook IPO. This might be a sneak preview of the bearded one's announcement next Wednesday, which might – – as with Spain – – could turn into a very fadeable non-event.
Well, ya'll did it again to me, didn't you?
This weekend, the chorus of hoots and hollers about the explosive rally coming on the Euro was deafening, and the guffaws about "Risk On" and smirks about my EUR/USD short were omnipresent.
I mean, good God in heaven, even ZeroHedge is screaming about a huge EUR/USD rally because of the record short interest.
Maybe. Maybe not. All I know is that for the first time in a couple of months, I woke up at 4 a.m. filled with worry at what I would see on my iPad, and instead of an explosive 2% up-move in the EUR/USD, I saw this (with the arrow marking the peak of "gee, Tim has a big short on the Euro, doesn't he?")
There is no welfare queen in history that can hold a candle to a bull. They depend on government hand-outs and bailouts for their success. These are the only tools they have left. Real economic growth isn't going to happen for years. Thus, bulls rely on artifice to synthesize success.
But perhaps the world is beginning collective realize that their lies have no substance, and that bailouts aren't the basis of prosperity.
I am a lonely bear surrounded by a world of liars and thieves, thus I remain cautious. But, at least for the moment, at least the bulls have been denied their mega-Monday rally that they were clucking about so mercilessly all Sunday.
One-eighth of a trillion euros created a rally that was vaporized before the market even opened in the United States. That money will never be seen again, and it's just going to make my long-held targets on the EUR/USD happen with more ferocity.
So keep asking for your bailouts, bulls. The world is changing beneath your hooves.
