One of my main concerns with a big bear bet is my thesis has not been we’re setting up a correction - rather a major reversal of a multiple decade trend.
holeyprofitnewsletter.substack.com/p/the-case-for-a-macro-bear-has-now
When doing that, I need to keep a sense of perspective. Everything in my analysis can be right but being a small percentage off can be several years of being wrong. Also, if we’re in the top of a multiple decade trend it is unreasonable to expect that to go out without a fight.
One of the ways in which it fights is big blow-offs. Something that scares me as a short. However another way it can go out fighting is to just slowly roll over. Trading for a couple years in the area that will be a top. Starting to downtrend but doing it in a subtle way building up to a real break.
You know the saying “If you boil a frog it jumps out”, right? Well the same may be for a bull. If the market were to just yank from 4300 to 2500 there’d not be a lot of time for bulls to make mistakes. However, if the market were to make a slow decline over quarters, bulls would have a lot of time to DCA.
My main problem with DCA has always been markets move fast through the climb but take a long time at the top. People, for many different reasons, tend to end up with positions heavily weighted at the top. Have too much losses when it’s down to add more and/or have decreased buying power because real world events.
Those inclined to speculate would have plenty time to make some “All In” decisions during this as both bulls and bears - and both of them would likely end up disappointed. Basically, it would serve the same purpose of gaining liquidity that a big blow off would.
This would be a good way for the long term trend to go out fighting. “The Long Goodbye”.
If this is happening we want to plan our bets in a series of swings. Essentially we’d be looking at a series of mini bull and bear markets. Swings of 10% or so over a few months. Getting what used to be full years worth of action over weeks (Because a lot of time will be taken up with flat/chop).
These would be prime conditions for trading in. Let’s look at how we’ve mapped out our general bull/bear times during this and where our best spots to bet would be.
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