Thursday, June 26, 2014

Is now the time for some protection?

What I see right now in the market is a volume deprived trading environment with a whole lot of large caps including the ones I am holding treading lower while the indices are all pushing higher. This to me is a sign of a market top, atleast for the short term. When markets are pushing ever higher with low volumes it is a sign that buyers have dried up but the sellers are not coming in either. So all we are really waiting for is a catalyst to set off the sellers. I believe the trigger are the following:

1. With GDP shrinking 2.5% some companies are bound to miss earnings. So bad headline numbers for some big names would possibly trigger some selling
2. Inflation is showing signs in multiple reports and so the chatter of FED raising rates is going to get louder. This is again headline news that might trigger a sell off.
3. The market is at all time highs with no significant correction for over 2 years now.
4. Last few days the market is opening significantly lower than its closing.

So I am thinking about getting some protection to the downside. The trade on my mind is the S&P index put options for the oct-dec timeframe. The options have been getting costlier last few days - a sign of market sentiment turning.

But as my previous post suggests, playing the short side of a trade is hard as hell. I am keeping my eyes open and my fingers quite, but one of these days I think I am going to get me some protection from this rather precarious looking market.

2 comments:

  1. Replies
    1. ha ha.... too late. Got me some protection and am already down on that trade. But I have four months and two earnings season to be proven wrong!

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