On my Tastytrade show recently, I’ve been mentioning how I believe the bears have “the wind at their backs” now. I pondered to myself what precisely what I meant by that phrase, and I wanted to share some thoughts on where my head is at on this topic.
From March 2009 through December 2014, the bulls had the wind at their backs. Early on, it was a full-on gale-force hurricane, provided by the $18 trillion of freshly-minted, asset-inflating “money” provided by the helpful central banks of (a) China (b) Europe (c) Japan (d) the good old US of A.
During those long, awful years, almost any downtick was bought. It took a few years for the market to get completely and utterly confident of this unseen wind. In 2010 and 2011, the market had some pretty big bouts of weakness, which got bears like me excited, but those drops were swiftly shaken off. From October 2011 forward, the dips became more and more shallow, and it eventually reached a point that bears were put into the position of the proverbial picking up dimes in front of a steamroller.
The entire Buy The F*cking Dip meme (BTFD) became well-entrenched and well-known. Every single spate of weakness was a buying opportunity, and the momentum of worldwide markets went into a full-blown whirlygig-spin in China, as uneducated farmers and bumpkins wandered into new brokerage offices and handed over their savings to make easy money in the completely fake Chinese stock market.
As we sit here now, of course, things have changed quite a bit, but my thesis is that the BTFD psyche is still fairly deeply-ingrained. After all, this psychosis has been with us for seven years – SEVEN YEARS – now, and it’s not just going to disappear overnight. It’s going to take many, many disappointments on the part of the bulls until they finally get the message (just as it took many, many years for dullards like me to finally realize that shorting wasn’t working out so great).
So, in miniature, we wind up with situations like what I posted about at 5:30 this morning, a time which the bulls were naturally celebrating, since a hard drop on the ES (summoned by dreadful economic data from China) had been reversed into a maybe-there’s-more-easing gain. The image I sloppily put together suggested a reversal at that time, and that was within a single ES point of being the high of the day.
In other words, in spite of a nearly 30-point reversal in favor of the bulls overnight, the wind was at the back of the bears. Even though the feeling sucked at the time, we frankly had nothing to worry about, because as incredible as it may seem, it’s the bears (all three of us) that are in charge now, as opposed to the government welfare queens known as equity bulls.
I am aggressively positioned right now. I have 117 – count ’em, 117 – short positions, and although there isn’t a single instance where I don’t hold my breath with fear before I fire up my iPad to see where the market is at, the cold fact of the matter is that anyone who looks at the chart below and thinks we are at the cusp of anything resembling a bull market is clinically insane and should be locked up for the protection of themselves and society at large: