The stock market's continuous climb to record highs has not come without moves to the downside. Wednesday's 1.5%+ slide is just another big red candle among a host of thousands of candles when placed side by side represent a historic bull market after the financial crisis bottom in 2009. Downside happens.
However upside has occurred far more frequently over the same time span.
And the last two years in particular the downside market moves have come even less frequently. This week on Tuesday we hit record highs, and one day later the market is in a free fall.
Just like that. Those trading for downside every day for the last few months were finally right. But then yesterday, one day later, the market reverses course and heads higher. The downside sees zero follow though.
And that is what makes trading for that inevitable pull back nearly impossible. And even if you do get the timing of it right, there is no continuation. All those bearish blogs and tweets you read on a daily basis can be informative, but they are terrible at telling you where the market is headed.
Bear markets rock. I'll be more than happy trading for downside when the time comes. 2008 and 2009 two of the best years to be trading options. Downside action had a purpose. It wasn't to reset oversold conditions, or sober up the bulls. It was hedge funds liquidating. It was margin calls. ... not the orderly pull back we saw on Wednesday.
One and done is the downside action these days. Until that changes it makes little sense to trade for something that doesn't happen too often.