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No Worries Here

This Bullish trend sorta reminds me of the end of the 90's, 2002 bull run, when nothing negative swayed the market direction from trending higher until the floor fell out.  I remember a gentlemen told me that he got into trading the markets in '98 cause a friend of his said that, "no matter what happens the markets keep climbing", and so this gentlemen began buying tech stocks.  Not long after getting into the market, the Dot.com bubble burst and this gentlemen lost his "shirt".  I'm not saying that we're in a bubble nor that the floor will fall out, but certainly if you consider the bullishness in the 90's on companies with extreme PE's and extreme negative revenues with ever increasing share values - PCLN comes to mind - then you might be a bit cautious when company values rise in uncertain economic conditions taking values to record highs, when in a Bull Market their share value remained undervalued.

The disconnect between Wall Street and Main Street continues.  Where's the reality? At what point will either the economy strengthen or the markets weaken?  The fact remains that without a strong labor market, the economy will remain fundamentally weak.  The likelihood then would be that the markets would correct, but someone continues to drive market values higher, and retailers are thinking that opportunities are missed.  My guess is that institutions are the engine behind the up move and as soon as retailers jump in with both feet, BOOM, where'd the floor go. 

I don't like it,  it smells rotten, yet I keep playing short-term spread trades that are stagnant to bullish waiting, just waiting for that expected correction.  Yeah, the trend is your friend, until it isn't.  I don't want to fight the trend, but something is not right.  My recent trades are Bull Put spreads using weekly options. I'm comfortable with trading GLD that way, but even there I'm expecting a correction.  Nothing moves in a straight line up, it's not normal.

For the moment the active investment community is looking for reasons to buy, yet SPY Put activity runs high with protective positions.  Hedging certainly makes sense and the best way to hedge is to use options.  If you're not comfortable with the current market and your ability to play it hedged, then get out.  Even hedged trades have a loss potential. 



Disclosure: Long GLD