Thursday, March 5, 2009

This bear leg is getting tired - protect your gains

Today the market action was totally brutal. But the volume was not commensurate with the outsize drop. That would mean that this leg of bear is almost done and there are fewer and fewer participants. Any "good" news such as passing of the bloated spending package in the US Senate will move the market in the upward direction for a while. But I am not convinced that any upward movement is sustainable because of how VIX behaved - it didn't budge much. That means the unwinding is orderly and it has further to go before people who are stepping up to buy in this market are forced to give up. They seem to have given up 25% since the beginning of the year and still not convinced. There will definitely come a time when the buyers will no show up. A day when you get really outsized drop in a light volume, I will load up on the long side. Till then I am going to protect the gain from this week. My gain so far is around 14%. I will lighten up my position in SDS by cutting my position to 1/2 tomorrow at the open and leave the other 1/2 run with a stop at my purchase price.

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