Gloom and Doom in the Coming Fall – Keep Dreaming
I won’t be exaggerating if I say that a big majority of “mostly successful traders” missed most of the downside that happened last Fall. As a human, when we miss an opportunity, it is our tendency to keep thinking what would have happened, if I did capitalize on that opportunity. And soon that leads to the belief that such an opportunity would come again.
The volatility we saw last fall was an exception. And it is not coming back. Those who are waiting for it might be in for a big surprise. I see so many people loading up on OTM Sep, Oct, Nov, Dec puts. The market always surprises most number of people. Because of what happened last fall, everyone believes that the gloom and doom scenario will again materialize this fall. Nope.. I don’t think that its happening.
Don’t get me wrong. I too strongly believe that we have to at least re-visit the March lows and possibly even break them by a decent amount, say SPX 550 or so. But it is some time before we get there – possibly next year – who knows. But certainly the speed at which things are materializing, I don’t see that gloom and doom scenario unfolding this fall.
Also, I think that the visit down to SPX 550 will not be fast and furious like last fall. I think we will have a more orderly decline. Again you are setting yourself up for disappointment if you are looking for that kind of volatility to return.
