THE MIND-NUMBING QUESTION OF THE MOMENT: WHAT NOW?
Yeah. What now?
Two words that fit together so simply and elegantly. You can use these two words in an almost endless array of situations, from being stuck in a cave to during more intimate moments in the bedroom. In this case, the question of "What Now?" will simply refer to where we are in the markets with respect to time and price.
There is nothing surprising about this move down, other than the persistence with which it refused to occur until Tuesday. There were numerous indications for a majority of the month that there would be sudden bearish consequences for the optimistic lethargy of the bulls. After all, the ease with which investors were dipping toes into the water sans sock, without fear of the predators that lurk just beneath the surface was disconcerting, at an absolute minimum. The market was in need of a re-calibration of sorts. Bringing us to the here now.
The simple fact of the matter with respect to the here and now is that we are in a period of uncertain market movements. I have been attempting to convey this message for the entirety of February, most recently increasing portfolio cash position in addition to the TZA hedge I have maintained since February 5th.
If you have ever frequented a poorly heated swimming pool during cold weather you will understand the following: The financial markets are very much like a poorly heated swimming pool in the winter. There are small spots of warm water close to the heated water jets and even smaller spots of heated water where your inconsiderate friends choose to urinate. In either case, the majority of the swimming pool is cold, unpleasant and makes you wish you had never taken a dip. Those who are intent on staying in the pool are forced to constantly find that small warm spot, not knowing whether they will be swimming in water or something much less pleasant. Those who have been around the block will be intent to wait for better weather to indulge their passion for swimming.
It is cold right now and the market waters are poorly heated. There will always be a large contingency of investors who insist on swimming year round, regardless of the fact that their actions are primitive, futile and likely detrimental in nature. There will be a minority of investors who simply wait until warm weather arrives in order to avoid sparring with futility.
The point here is obvious: There is no need to be 100% involved in the markets year round. Profits find those who are patient and diligent in their actions. Profits love those who understand that it only takes a few good investments per year to create tremendous gains. The rest of the year is just marking time, making sure risk is properly managed and researching the ideas that will carry you during the next advantageous period.
What now? Nothing, really.
