NFTRH+; if you are considering shorting…

If you, like me, think about shorting (in my case it would be against some long positions) here are a couple charts and some parameters for consideration. The caveats to shorting are the bull-biased seasonal (until mid-February, on average) and the bullish post mid-term election period (on average). One neutral factor is the no longer over-bearish sentiment profile.

Let’s look at a couple situations using ETFs.

SPY is back to a ‘logical’ shorting spot. You may recall that it hit our target at the SMA 200 in August and I for one out thought myself thinking ‘it’s too logical for it to just stop here as expected’ and then it did. Well, here is SPY back to the downtrending SMA 200.

It is tempting, but I still wonder whether the Q4-Q1 seasonal could use a drive to over-bullish (speculative) sentiment in order to test the August high and fill a couple gaps. That’s me over thinking again. But interest bearing cash allows that sort of hesitance (and patience). Cash is ‘no lose’ now, while depending on casino patrons’ Q4 actions, shorting is always a risk.


Back on 11.16 we noted a contrarian bear signal on the Semi sector. It was similar Warren Buffett hype to that which signaled the top in the gold mining sector in August, 2020. As noted in that update, I…

…would consider shorting the Semis as well (outright on SMH or SOXS) if today’s pullback is not the beginning of a real pullback. Yesterday would have been the day to short. So for now, I just thought it was notable that Warren is being touted again for his stake in another sector. Semis are highly cyclical and cyclical is not my current market view.

Well, it was not the beginning of a real pullback, as SMH came back to ding and thus far hold below the downtrending SMA 200. Again, it’s tempting.


Bottom Line

It’s tempting, but other sectors like Materials, Industrials, Staples and Healthcare have taken out their suspect to downtrending SMA 200. That is a guide to what bullish greed can do to you if you don’t time shorting right.  So for me it’s also tempting to just hold cash and the positions I have. But I am on a day to day view now. Not as a day trader, but as a day to day manager of a market viewpoint.

In my perfect world the markets would continue to rally until the clear seasonal termination point (on average) in mid-February. But perfect worlds do not exist in markets. Only risk/reward exists. I’d rather have clear and strenuously over-bullish sentiment in order to short now. So what if the Q4-Q1 play does indeed drag on to find itself at an over-bullish extreme by February?

That could be a no-brainer, eh?

February stock market seasonality

The current viewpoint is Q4-Q1 relief rally, but some important indexes/ETFs are still vulnerable and the two headline index ETFs above are technically in firm bear market trends and at logical endpoints. But as in August when I chickened out of shorting SPY/SPX at the SMA 200 it seems almost too logical once again to expect a reversal.

Just putting a personal mental exercise in writing for consideration. Obviously, I have no firm conclusion at this time.