Originally Posted by wind_magic
I am starting to look for the exit so I can get out of these long trades I have been in. I am still long at the moment, but I am getting out of all these April calls I have been holding, for example. The next few months I think we might keep rallying, these things can continue longer than you ever believe they will. If I had to guess again, and again I'd never trade this because you only trade what the market brings you, not what you think is going to happen, ...
* They keep buying off that 7k bottom into the high-8000's, possibly as high as 9500, advancing faster as the rally gets to its highest levels, bumpy until then - I think probably June/July will be a critical time for the longs.
* The exit will be a nice rally that heads for the sky for a number of days in a row, when they are all talking about recovery and missed opportunities to buy, when Kudlow is aglow and basking in his own greatness and can't stop bobble-heading the words "mustard seed". The bulls will be talking about how wrong all the bears have been, they'll even start talking about the buy-and-hold strategy again, talking about how people should have bought the bottom, about how there are still good stocks to buy and good prices, and all the rest.
* People will be talking about how the stimulus is working, how the acceleration in unemployment isn't increasing as quickly, housing numbers aren't as bad, blah blah blah, and they'll be talking about how the treasury bubble is going to burst, the $us will take a hit against other major currencies and commodities, people will even be talking about how strong spring home sales have been and season employment and all the usual non-sense, Obama the savior and Geithner isn't so bad ...
* Somewhere near the long term downtrend line when it looks like the bulls have it under control again and people are dog piling back in for a repeat of previous buy-the-dip "V" bottoms, I'll quietly get short again for the next leg down. It will again become time for treasuries, $us, and to sell everything else, but at that time it'll look like they are sounding the all clear and it'll be hard to get short (as usual) because it looks like the rally is so strong.
* Then I think equities will take a huge hit again, fast off of the rally highs, nearly straight down as people who got long at about 10k again realize that they are missing their chance to get out without losing everything, it'll be like a mass revelation all at once, and they'll panic sell it back into the 8000's and then try to save it by trading in the low to mid-8000's for a while. They'll remember how all they wanted was the chance to get out without losing everything, they'll remember how they felt during the first leg down, and plenty of new people will learn the hard way what a bear market rally is, and what it means to say that bear market rallies are stronger than bull market rallies.
* Then it'll sell the lows and once it breaks about 7000 again it won't find another floor until 5500 or lower, and the end of that leg down will be even more dramatic than the end of the first leg, and more people will finally settle in for the long dark bear market to come ...
* And people won't be amused.
Like I said, I'd never trade it, because you trade what comes, not what you think will happen ..
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