The market is in an odd state. Equilibrium in our view is a rare commodity. The norm is defined by complex adaptive traits perennially displayed in all markets—in this majority environment equilibrium takes a back seat.
But today, a form of equilibrium seems to hold court. We are reminded of the ocean and its shelves. Each shelf is defined by temperature. At times shelves dip into each other only to be pushed back by the overriding characteristics. Like Domino’s overcoming Burger King.
The push and pull of today’s market is almost novel—at least in our myopic remembrance. The 70’s come to mind. For every piece of good news, there seems to be a battling news piece negating any progress. The cold water dips into the upper shelf only to be pushed back by the mass of overriding temperature from above.
What does this mean, is there utility? It seems to us the environment as we have defined leads into a trading culture unseen for the correlated movements of the past 30 years. And if that’s the case, where do you take profits and when do you let a gain ride?
We just messed up. We sold MICC calls at a 25% gain only to have the calls gain another 15%.
Hopefully, we are learning.
Disclosure: Long MICC