I'm Bearish Here, But Not a Perma Bear

I am not a typical Seeking Alpha perma bear. My stated strategy is long bias that is long and short but always net long. My typical net position is 40-60% long. Currently, I am 26% net long, the lowest I have been in 5 years.

Of course, I wish I had been 100% net long from March 9, 2009 until today, but that is not consistant with my cautious but positive style.

The reason for my caution is both objective and subjective. Objective because many technical measures are at or approaching bullish extremes (see Bill Luby's comments on the SPX at 15% above its 200 day simple moving average for the first time since 1999, or David Fry's charts.) Objective because the second quarter earnings reports mostly beat reduced estimates but were short on revenues.

Subjective because many commentators who were non-believers in the rally (especially the last 100 SPX points) are now talking about how quickly the SPX could move from 1000 to 1100 because there was so little trading
between those two levels on the way down.

Now the SPX could indeed make a quick move to 1100. If it does, I will profit from it, but I will also be mostly hedged against a decline. At this point it is more important to me to protect capital from loss than it is to maximize gain.

Disclosure: long 80+ stocks, short SPX calls, 26% net long.

Comments

[Larry House:]

Reasonable view. If you say there are any problems out there and the recession may not be over, some will call you a "fear monger" and worse. These times call for great caution. I am long also, but I see many challenges yet to face.

Aug 05 10:04 AM

[Henry Buttal:]

Agreed. I vote for a least a stall here, if not an outright retracement.

However, barring some major tightening in the credit markets, I think the move to the upside picks back up within 90 days.

Aug 05 10:09 AM

[patrick1244:]

This guy has lost a lot of money in the last 3 months. Being out of the market in a rally is just as bad as being a buy and hold guy in a Bear Market. If you look at the last 4 major bear markets including 1929 you will see that once a market hits a bottom typically you have 4-5 years of a bull market. I am fully invested but I will not hesistate to pull my money if things start to go south, I have learned not to listen to any market pundents. I go strictly by the tale of the tape.

Aug 05 11:30 AM

[RiskReturnO...:]

Today is critical day ... if market hold SPY 1000, Nasdaq 2000 ... then any pullback will be shallow ... if market breaks on downside in last 30 minutues, then potential retest of SPY 880-900 in the next few weeks ...

Aug 05 12:33 PM

[Old Trader:]

Sort of O/T, but I take some offense at the label "perma bear". I suggest that average reader/commentor on this site is more knowledgable than the typical retail investor, and what is described as a "perma bear" mindset is more like a realistic attitude/perspective. Just my thoughts, fwiw.

Aug 06 11:16 AM

[Gerry Sullivan:]

Since this rally began in March there has been a generally
bearish feel to most of the articles and comments on Seeking Alpha. Since the general market has rallied over 50%, being bearish was simply wrong.

I turned bearish earlier this week and right now (11 AM Friday) that call seems premature as the major averages are all at new recovery highs. I am still quite hedged, but 29% net long as contrasted to the 26% net long position I had when this article was written.

This might be the last gasp of the rally that began on March 9 or it might be the start of the next leg, that much discussed quick move to SPX 1100. Best to allow for either.

Aug 07 11:17 AM