Today is the Ultimate Bear Trap

I came into today 10% long and 10% short, 80% cash.

And to be quite honest, I had some massive suspicions about yesterday’s sell-off. It seemed too quick, too amateur, and quite frankly, too easy. I had to take profits in existing positions yesterday because there were some sizable gains that I had made off of the lows from last Wednesday. I didn’t want to risk those, if in fact oil did in fact decide to lose the support it was holding since then. So booking gains was absolutely necessary because if today gapped down 2% or more, the 6% I was holding in Facebook (FB) for instance could have seen much of its profits compromised and that was not an option.

So today I close out the hedge for a small, small loss, and add two additional longs to my existing long position I held overnight. But with the wave of earnings, the existing risk in oil and China, along with the Fed tomorrow, getting too heavy on the long side is extremely risky business. Oil has a lot of upside still if it decides to keep bouncing. China is already down 22% on the year, and the Fed cannot afford to put some bone-head wording in its statement tomorrow that would cause the market to start up an entire round of selling in an election year. So it seems like the market has a good chance of continuing to rally here, or at least that is my suspicion here, with a max bounce of 2000 on $SPX over the course of this week and next.

As always…Stay Tuned!