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Déjà Vu

Yesterday the S&P 500 closed at 1150 which matched the January 19th year-to-date high. This is also the high for the rally that has been forging ahead since March of 2009. If I were a trader, I'd be long the market, but I'm not a trader so I will remain in my short positions even though I could be suffering considerable pain for the foreseeable future. I'm not rattled yet although the paper losses I've experienced make me second guess myself on a daily basis. It takes a leap of faith to remain leveraged and short during a 12 month run to the upside. Now, you might think I've been taken to the cleaners, but that doesn't happen until I sell for a loss. The odds are in my favor that we will see a significant correction in the months ahead, especially since the market is overvalued and we really haven't backed and filled for a significant amount since a year ago. The bulls do tell a compelling story, but I'm just not buying it. I thought bad financial news would redefine the current investing landscape and we'd be in for a white knuckle ride to the downside, but I've been proven wrong again. This market is off the charts.

People I respect tell me if a stock or your portfolio is down 50%, it takes a 100% increase to get back to even. I am well aware of this and still am not gun shy and consider myself battle tested. As I've stated before, leveraged portfolios tend to rise and fall at lights out speed. You just have to get used to the volatility. Let's see how bold I am when the S&P 500 reaches 1200. I may have to snap out of it and crawl away with my tail between my legs, but I don't think so. I felt this gnawing in my stomach two months ago when the market reached its high the last time and it turned around and headed south. With a dearth of economic news being released the next few weeks and earnings season almost a month away, we very well could drift higher now. I am prepared for that and will counter punch by doing nothing. A rope-a-dope situation, if you will.