The Next Shoe Awaits

I have been very busy the past several days, finding trade setups, doing the 30-day blogging challenge at BitPost and the day job. That's my caveat for this observation: the market has declined steadily in September, but this sell-off feels different. The word that comes to mind for this pullback is quiet. There has been no major spike in the VIX. The prior dips all saw some bearish bravado, bulls whining about "why won't the market go up" or crowing about buying the dip. For myself, I was mostly breaking even in the prior dips because gains were given back. Maybe I'll see my profits get blown up by a face-ripping rebound, but right now my whole options portfolio is up about 50 percent in the past few days, far more than I was in prior pullbacks and I'm more aggressively short than I have ever been in nominal terms and percentage terms. A week ago I was thinking about throwing in the towel and I will probably throw in the towel if this rally reverses because if that happens, my hunch is the "real" correction or the bear market itself won't start until after the taper begins. I know myself thoguh, and when I'm ready to give up is usually when the turn is finally at hand.

Additionally, the quiet means there are still great setups. A lot of stocks have broken key support levels, but have not started cascading lower. I bought a slightly out of the money puts on Chipotle this morning. The stock is above trendline support, but only about 2 percent away. Last time it lost its 50-day moving average in May 2021, it quickly shed 10 percent in a couple of weeks. There's a gap down around $1600 that is only about 12 percent away. Back on September 8, I posted Shorting High Value Stocks. I revisited the topic on September 24 in Looking for the New RCAs.

I accumulated more puts on ASML as the stock bounced a bit. There are some like CMG that only recently broke their 50-day moving averages. The FANGs aside from FB and APPL are high priced, as are stocks such as SHOP, MELI, ALGN, IDXX, ISRG, HUBS, RH, etc. Not all of these are great short candidates, but they are examples of "The stock is too damn high!" More seriously, when the VIX eventually rises, some of these high prices stocks will quickly drop. Their put options are cheap if timed correctly. Speaking of which, one of the market leaders busted its March 2020 trendline today. I will post it tomorrow after the open.