Should I Sleep Fine Having Shorts Over This Weekend?

[shortie]

To make a long story short, I have short positions in SPY, XLE, XLF, QQQQ. As it so happens Full Moon will take place this Sunday. So, I hope this will coincide with a major turning point in the market and my shorts will show some profits.

What worries me that Full Moon may not work as expected. Then I am actually shorting ETFs that are making new high for the year and I am at the mercy of the crazy momentum players.

What do the charts tell you? Should I be shorting the strongest ETF like QQQQ or XLE because they are overextended? Should I be focusing on the weakest one (XLF)?

Or cover my shorts here?

 

[shortie]

 

[Eko_Trader]

Wish I could help you, Buddy. I've been sleeping with one eye open since I've been short this week. Honestly, It's probably a trade I shouldn't have made given the momentum. I just didn't see the upside craze until too late. Pretty stupid, I must say.

I do feel like this thing sets up for a pull back. If you noticed that this Rally started with Citi saying they may actually make a profit (Which we all knew was impossible, but nonetheless we still rallied) in the second quarter. However, the financials are starting to diverge from the market since the week started. Also notice that financials have been leading the market up, so I think the market will catch up to the financials. I would suggest that financials may turn for another surge, but so far it has become a crowded trade that's overextended.

Crude is coming in a little, and that may cause a pullback in the reflation trade. If that happens, coupled with a diverging financial sector, we may see a nice pull back.

Disclosure: I am already short, therefore I am biased. If you have a different opinion, please share.

 

[FanOfFridays]

Quote from shortie:
What worries me that Full Moon may not work as expected.

Or cover my shorts here?

You probably know what kind of comments you're inviting by making these two statements (either one would be sufficient but together...).

Anyhow, instead of flaming you I'll just say this. If you're posting on an anonymous message board filled with non-traders for advice as to whether you should cover your shorts, your position size is too big and your trades are almost certainly too positively correlated - you have separate trades that sort of function like the same trade. To paraphrase the trader in Schwager's first book (can't quite recall who it was) cover until you can sleep at night. Get your position size down to the point where the next move up, if it occurs, can't do significant damage to your account.

The hardest thing in trading is to put a position on, see the market go straight the other way, and then have the balls to cover and re-enter. That's the biggest lesson I've learned in the past 3 years - test the market, listen to what it's saying and cover and re-enter if necessary.

You can see for yourself what the markets are saying.

 

[ksonsinc]

financials are very weak so i think XLF and fas is he best option to short
Also since the market goes up i dont see financials having real strength to go higher.
u have to becarefull of the others

 

[Spydertrader]

Quote from shortie:

I hope ...

The above quoted phrase has no place in trading. The fact that you used the word 'hope' to describe a trade should provide you all the answers you need.

- Spydertrader

 

[AMT4SWA]

Quote from shortie:

To make a long story short, I have short positions in SPY, XLE, XLF, QQQQ. As it so happens Full Moon will take place this Sunday. So, I hope this will coincide with a major turning point in the market and my shorts will show some profits.

What worries me that Full Moon may not work as expected. Then I am actually shorting ETFs that are making new high for the year and I am at the mercy of the crazy momentum players.

What do the charts tell you? Should I be shorting the strongest ETF like QQQQ or XLE because they are overextended? Should I be focusing on the weakest one (XLF)?

Or cover my shorts here?

You will have your answer PRIOR to Friday's close.......so sit back and enjoy the trade.

 

[Clubber Lang]

Quote from ksonsinc:

financials are very weak so i think XLF and fas is he best option to short

For the 1000th time, FAS and FAZ do not correlate over time with what the financials are doing.

Leveraged ETF's are for intraday and short term swing trades only.

 

[shortie]

Actually, I am becoming suspicious about the financials. They appear weak compared to the other 3. Maybe too obviously weak? what if it is a setup that is too obvious to be valid? Lure shorts before one last parabolic move up?

Maybe I am getting a bit paranoid here.

 

[shortie]

Quote from traderNik:

You probably know what kind of comments you're inviting by making these two statements (either one would be sufficient but together...).

Anyhow, instead of flaming you I'll just say this. If you're posting on an anonymous message board filled with non-traders for advice as to whether you should cover your shorts, your position size is too big and your trades are almost certainly too positively correlated - you have separate trades that sort of function like the same trade. To paraphrase the trader in Schwager's first book (can't quite recall who it was) cover until you can sleep at night. Get your position size down to the point where the next move up, if it occurs, can't do significant damage to your account.

The hardest thing in trading is to put a position on, see the market go straight the other way, and then have the balls to cover and re-enter. That's the biggest lesson I've learned in the past 3 years - test the market, listen to what it's saying and cover and re-enter if necessary.

You can see for yourself what the markets are saying.

I realize that this is ET and one gets all kinds of advice. But I do have a choice whose advise to pay attention to if any. Mostly I just like to see a good discussion.