As you will already know, I think the bull market is over. In the chat room this morning I detailed my plan for shorting the stock market by legging into tight vertical put spreads with a strike differential of perhaps $1-$2 rather than the usual $5-$10. I’d prefer to do this with stocks in a strong rally, but it’s possible we may not see much of a rally if and when the urgently awaited legislative turd emerges from Congress in the form of a compromise. To get our minds right for the task, I’ll suggest monitoring the January 120-122 put spread. It closed yesterday at 0.05, but we’ll be looking to put it on for ‘even’ or better, starting with a purchase of perhaps 60 of the Jan 122 puts. To be in a position to short January 120 puts against them for at least as much as we have paid, we’ll need to see a decline of about 1.20 points from the price where we’ve bought the 122s. _______ UPDATE (9:50 p.m.): Yesterday’s chock-full-o’-nuts rally has encouraged me to think we can be a little more greedy about where we get short. This could prove to be a game of ‘chicken’, but if we stick to the conservative spread tactic described above, our timing will not have to be so perfect. ______ UPDATE (October 20, 8:34 p.m. EDT): Stay tuned for a short-able target, since this vehicle is headed higher if the E-Mini S&Ps are to reach their target at 1748.00. _______ UPDATE (October 22, 9:25 p.m. EDT): With a rally target at 1767.00, we can remain patient. If and when DIA reaches a threshold analogous to that target, we’ll want to short it aggressively.
