Maybe the markets are tired of winning. Gold and silver too. We can toss Treasuries into that mix as well.
I'm sitting here watching Pinterest (PINS) give back all the gains from this morning. Kandi Technologies (KNDI) is two nasty days into its reversal. Even though the S&P 500 is barely in the red, while the Nasdaq is slightly worse, and the Russell 2000 is higher today, it still doesn't feel great out there. August and September traditionally aren't great months, but thus far I've watched many traders achieve solid returns. Admittedly, I've seen a little more frustration than in previous months as some of the easy wins haven't been as easy. I've discussed that over the past few days, but we're barely off records highs, so it's hard to be pessimistic.
Or is it?
You can still own positions and be pessimistic. The only adjustment you need to make is your risk management. Maybe you hold more calls or call spreads than stocks. Maybe you cut sizes in half or maintain tighter trailing stops. Heck, maybe you take advantage of the lower market volatility and buy some put protection. A trader could even check out underperforming sectors and do some rebalancing into those names.
Lightly correlated stocks or non-correlated stocks would be another avenue. The biggest challenge there is we've seen precious metals, Treasuries, and stocks all surge together. That "diversification" feature that should exist hasn't quite lived up to its moniker yet.
Unfortunately, every time it looks like we might get some healthy, corrective action, it fizzles in a few days, sometimes a few hours. The market continues to tell us we need to stay long and be hyper-sensitive to risk management, but long is long.
Often I would pivot to selling puts, but I don't think this is the time. Volatility isn't high enough and if we happen to get a rug pull, then there will be better opportunities to sell puts in the near future. I still stick to the guise of tight stops and defined risk. While I've maintained a higher level of cash than normal in my trading account, it's offered no reward or benefit for doing so.
We're just about out of earnings season, so that catalyst will cease soon which leaves us with possible stimulus and the upcoming election. Stimulus would likely goose the market, but I'm not confident the election will do anything to lessen volatility and promote confidence. I believe the next 60 days will be the highest risk period of the year, well, outside of that nastiness in March, so let's call it the highest risk time to own stocks since the end of March. My view, as I've stated above, is not to crawl into a fetal position, but rather arm yourself with tools and weapons in case a bear finally shows itself.