Act like schizophrenia

As I said many times before, the market swings its mood constantly and widely. It is hard to believe just about two months ago, the overwhelming mood for the market was extremely depressing like there was no tomorrow to come. Then in just two months time, we see euphoria everywhere. This is typically like a schizo with the mood swinging from depression to euphoria within hours and days without much rationale. As I alluded to last week, I was expecting a good up-move for the market this week but I thought it would stop around 3050 level for S&P. Sure I'm too pessimistically wrong as it handsomely broke out although gave back and came in within 3050 by closing today. But it looks like and I won't be surprised if S&P wants to march toward 3100 next week. Having said that,  just one small warning: the market is setting up again for a quick 100-200 mini crash at any moment. The same setup in the past few months has triggered such kind of plunge 3 times already. Will this time be different? I doubt!

In this kind of highly emotionally charged market, traders really need to act like a schizo and swings their mood quickly instead of being stuck in one end. That's probably the only way to survive the market instead of being slaughtered like pigs. Give you an real example that I have been playing with till now. Early this year, I posted a case analysis about my bearish view on AMD, arguing that for the next few months at least, AMD would be in a tough spot after challenging its all time high in Jan. Well, maybe just luck on my side with the Mar crash, AMD indeed has undergone some difficult time in the past 5 months or so. I initially set up a bearish put spread with a long arm for 2021 Jan $45. During the past few months, AMD has gone through a roller-coasting journey. While my longer term view on AMD is till bearish, it does not mean I must be bearish for it at any moment. Rather, I just act like a schizo in terms of mood swings and ride with it up and down several times. By constantly changing my short arm for bearish or bullish bet with my 2021 Jan $45 put intact, I have harvested not only all the cost for the long term put premium but have made much more than that. In other words, by swinging like a schizo, the trade has been changing its short term direction constantly that has enabled me to earn short term incomes from it. It has become a mini income machine for me at the moment. Even it suddenly changed its course and become super strong in the uptrend to move up from here, I won't lose anything now with good gain already secured. But I doubt it is out of the woods already by now. Rather, judging by its TA, I think it is vulnerable as the whole market for a swift downdraft. How low can it go? I don't know but low $40s seems again a reasonable target for it as of now. My trade is already set up for this potential sharp downward move again for it!