We are in the Twilight Zone of investing as we run into the final weeks of 2020.
Being in such a peculiar spot has created a bifurcation of sorts, in that professional investors recognize how this story ends, with blood, gore and mayhem being the inevitable outcome.
However, all the meanwhile, we are in the midst of a retail power play that has amateur option traders trouncing anything your Wall Street professional can conjure up.
Even the tame side of the retail investment spectrum, who just decide to trade stocks, are making seasoned professionals on Wall Street look like newbies with investments in TSLA, NET, SPCE, SNOW and countless others.
What it becomes is a question of approach as we move into 2021.
There is a certain inevitability that a majority of us know is coming. However, in the meantime, performance in such a vibrant bullish environment demands investor participation.
Balancing the inevitability of what is to come (bearish), with the performance demands of keeping up with the major market averages (bullish), will be the key to outperforming in the weeks ahead, as well as throughout 2021.
What this means for investors is agile footing, as long positions should give way periodically to a market neutral stance when risk/reward dictates.
A vast majority of those investors who have been perpetually bullish throughout Q3 and Q4, with little doubt in their thesis, will be the ones who suffer the largest drawdowns once the inevitable future of maniacal speculation becomes the inevitable present of a market that succumbs under its own weight.
In order to avoid being in the vast majority, the attention of investors must be focused on risk, with a strategy towards hedging risk and possibly getting net short incrementally when price dictates that course of action.
A singular minded focus on bullish excess, while being rewarding currently, must be tempered with a realization of the risks involved in a derivative driven market that has created a frenzy among investors.
While we are net long presently, realizing that investors are being treated to a course on anomalous market behavior of the bullish kind, our focus remains on preservation of the capital gains created this year through a fine balance of opportunistic bullishness and tactical bearish operations, when the market dictates.
Be like water, my friend.
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