Thursday, May 20, 2010

Stock Market Divergence - Time To Exit Shorts

As you know I've been bearish on the stock market and today we have a nice sharp down open. You'll notice in the above 5 day 10 minute chart of the Euro vs S&P that the Euro stopped going down. These two markets have been  positively correlated but now we are seeing a divergence. Having said that, I am using this down open to exit most of my short position. This has been a huge move to the downside.

I will look to short the next good bounce in the stock market as I do feel there is more downside for stocks in the weeks to come.


Anonymous said...

Do you think it's necessary for stocks to move with the EUR and GBP, Kevin? They pretty much decoupled with everything else since yesterday.

Kevin said...

Of course it is not necessary but these markets have been trending together and now we are seeing a divergence. The main reason for me exiting my shorts here is that we've had a large move down and I was looking for a reason to exit.

Anonymous said...

You are good. I exited my short positions one day too early (not counting the ones I was stopped out). I agree that the summer holds a trading range if not more selling (a la 2004). I'm bullish on energy though. This morning I was stopped out from some speculative in money calls I got yesterday, but my core positions are still intact.

Kevin said...

Thanks Jack,

I too was stopped out of a few shorts at the very beginning, you are not alone. Overall, the shorts I did have on worked out very well.

Anonymous said...

Nice to see you post daily... very good stuff.

The worrying part is everyone is waiting for a rally to short. I don't know if that will ever materialize.



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