First we’ll cover some high level overview strategical aspects for a being a bear.
I’ve posted a lot of very bullish analysis of late and there are a few reasons. One, the idea of a bull trap and classic break is well covered now. Anything I have to say about that is mostly redundant to my readers and if you want to get that sort of analysis it’s not hard to find these days.
I think it’s important someone who did well as a bear gives an objective representation of the bull case. People who are always bullish are only ever going to talk the bull case and their analysis is not objective. As someone who’s comfortable as a bear it should be clear I am not making bull forecasts because it’s all I know.
Mostly I am planning for what I am afraid of. I’m not afraid of a bear move. I only came into equities to trade the crash and then I was going to go back to Forex to trade the bursting of the currency bubbles the crash would cause. I planned the SPX short thing to be about a 6 month gig.
That was 4 years ago. 8 months in I did hit the 2020 drop and thought I’d nailed it, but a lot has happened since then. I know if this goes higher there are levels I am going to short it again and I also know it’s not practically viable to be perpetually short waiting to be right. It literally will not work if you’re too early and wrong.
Here was my 2020 forecast. Accurate in the low but it went on to make a new high.
If I shorted the bounce in 2020and held my shorts by now I’d need SPX down 50% off the high to be a little bit ahead. I’d need SPX down over 70% to get 1:1 on my drawdown.
Someone caught short on NVDA at 250 would now need the stock to goes to zero to get 1:1 return on their drawdown.
These are NOT GOOD ODDS. If you think about how many times you have to be right about this to expect to make money, it is almost impossible to achieve.
Statistical probabilities of being profitable shorting something too early and letting it run down a substantial percentage are very slim. Probability of being right overall is high - but being right is easier than making money. A lot of people get things right on a conceptual basis but not in the real sense of practical trades.
I know my odds of being overall profitable if we get a move up to here and I have a short only bias all the way are drastically decreased.
If it runs all the fib extensions, for most of the crash I would just be waiting to get back to even.
Just not viable. It’s essential to be flat of long the bull moves. Being a persistent bear has a low probability of profit unless you’re able to take on more and more risk at higher prices. Which would work out nicely if it works out, but it seems a very aggressive and risky strategy. Especially if you load too low.
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