Breakout

Waiting For The Dow Industrials To Be Cut In Half: Thomas Kee

Breakout

There's an old adage on Wall Street that tries to gauge sentiment by characterizing whether investors are more fearful of missing the bus or getting run over by the bus. For the past few weeks, the latter has prevailed, as investors truly fled the stock market at every possible chance to get out of the way of what has truly been a slow moving train wreck that's seen 8% cleaved off the benchmark S&P 500.

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Prior to that, the great summer run-up, that took stocks to a four year high, had an equivalent, albeit opposite, effect in as much as traders were practically panicking not to get left behind or praying for a reasonable entry point.

Such is the up and down life of a stock trader. But just like when the world seems about to end and Warren Buffett reaches for his "elephant gun" to bag some big value, at least one bear is urging his fellow shorts to wait for brighter days before placing any new bets.

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"People always want to jump in on the short side after the market has declined," says Tom Kee, President and CEO of Stock Traders Daily in the attached video.

As much as this self-described "Grim Reaper" expects the market to be down longer term, including the possibility of a 50% drop in the Dow, he says the best time to do that (go short) is on market strength.

"If the market shows strength, you want to initiate short positions," he says, calling the 1400 range for the S&P 500 an "ideal" spot to get short.

His closing advice for the pessimistically inclined: "you have to do the opposite of the masses and never chase the market on the downside or chase it lower."

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