More doubles from shorts?

Hope you are not surprised for the reversal today! Actually I was expecting for a total reversal, i.e. opening high in green but closing low in red. It didn't happen today but S&P lost more than a half from its intraday high by closing. Maybe I'm reading too much into it but I do think the 7 week long rally is likely coming to its end. We may have seen the capitulation buy yesterday when the final bunch of people still on the sideline before yesterday finally threw in the towel and rushed to buy as they felt they would be totally left behind if not buying now. Likely a big mistake and sorrow for them!!

Indeed it is difficult to be bearish these days as all you hear about is the music of going up and up. That's usually the time one needs to be extremely cautious if you have the urge of FOMO. It is almost always ended up badly regardless how great you may feel initially. Such kind of gain can evaporate very quickly unless you are nimble enough for daily type of trading. But for most traders with a bit longer timeframe, following the trend based on TA signals is often a good bet. As a general advice, it is much easier to buy when everyone is dumping and sell when everyone is chasing. That's how you can have a higher chance to buy low and sell high. Just a real example of mine. FDX was hit hard late Dec due to poor earnings but to me it was clearly oversold when it crashed to $150ish. So it was really easy to buy low for FDX a few weeks ago when no one was interested. Now about 7 weeks later, it has jumped 20% higher and it seems everyone is chasing it now. But I think near term there is likely not much further higher to go but a higher chance of a correction. So I closed my call options with 150% profit now and placed a bearish put option now. It is easier to sell now as everyone is buying. But we may see a totally different sentiment in a few weeks from now. Virtually all the oversold stocks in Dec are behaving like that right now. Similar to the overall market, they are either bumping against the 50 DMA or 200 DMA, the strong resistance or the downtrend line. Given how much stretched to the upside extreme the whole market is with a very swift shift of the sentiment to the euphoric side, the contrarian me tells me it is a much better time to bet for the downside now. So I'm aggressive in opening up more and more short positions when the market is  just pushing higher and higher. I won't be surprised to see many doubles in a few weeks from now, similar to my FDX trade but in the opposite direction. You may think I have lost my mind by shorting a lot of great stocks like INTC, CSCO, MSFT, NFLX, XOM or even SMH as a whole. No, I don't dislike them and actually like them all. That's why I opened long positions for many of them later Dec, aiming for a multi-month long trade. But the Fed drastic change of tone from hawkish to dovish has moved up the market sentiment tremendously, but too much too soon to me. That's why I don't trust the sustainability of this 7 weeks long uptrend and want to lock in many good profits that I was not expecting to come so soon so fast.  And for now, I don't like their TAs for the near term. The beauty of my bearish bet now with low volatility is that it does not cost me much to short them. If I'm wrong (which is certainly possible), so be it for the small amount loss. But if I'm right as I'm confident right now, they can easily double or even higher like 5-10 times more for my bets.  

Don't get me wrong. I'm not bearish for the market at all in the longer term and I'm still expecting a new high later this year as I said weeks ago when everyone was outcrying and panicky (didn't I say to expect a 20% up for 2019 in my very last blog in 2018?). But I don't believe a straight-line up, especially under the extreme euphoric mood. 

JUST BE CAUTIOUS!!