Don’t Short Yet

Hopefully you’re not too late to the party.  But, if you’re a new reader of mine and you haven’t been short and you still own a ton of stocks, don’t do it just yet.  The stock market is oversold and I said on the air yesterday that it wouldn’t surprise me to see a few days or even a couple of weeks of higher prices for equities.  It’s just the ebb and flow of the markets.  Too many people leaning one way. 

I think it’s funny how we had 2 key pieces of data come out today that normally would have taken prices lower.  But, because the market is oversold, the higher than expected CPI is being ignored.  In addition, at 9:00, the University of Michigan Confidence number came out at 56.7, an extremely low reading (a 28 year low).  This is usually correlated with the equity market.  But, when that number came out, the Dow was up 40.  It’s now up 130.  Everyone spins the data the way they want.  It depends on if the market is oversold or overbought.

So, if you own stocks, enjoy the run for a few days.  I actually covered some shorts yesterday for a quick trade.  But, will look to re-enter that as we go up here over the next few days.  Now, I want to be clear that we aren’t so oversold that I’m looking for a 2 month rally.  I’m looking for a 2 week rally.  We never got to the type of fear we saw back in March.  So, this is a bounce (dead cat bounce).  A reversion to the mean if you will.

Do not ignore this market.  This is where we are supposed to rally temporarily but that doesn’t mean you can walk away because it could turn down in an instant.  Don’t lean too much one direction or another.  Don’t be too long or too short right here.

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