Full markets analysis and two housekeeping items

Flattish start to the day. And the longer we sit around here trying to break through these levels in the Nasdaq and the broader markets too, the more you’ll hear the technicians and the pundits talk about how that becomes bigger resistance to a higher high. The flip side of that (Flip It when it comes to what everybody else is saying, of course) is that if the markets can break through to new highs, that same resistance immediately becomes support. And the breakout could be on.

Then again, if you’re to think of the answer to the great contrarian question of “Who’s more scared, the bulls or the bears?”, the bulls are getting complacent again and the bears are finally, finally starting to get scared. Not sure the bears are truly “scared” yet though.

All of this thinking-out-loud analysis is to underscore that markets are entering a muddled territory here. You guys have seen me get aggressively long several times over the last few years when stocks have been trashed in a panic over EU crises and Japan nuclear disasters. And you’ve seen me lighten up several times too, when the markets have relief-rallied and hit new highs.

I’ve not been bearish in my analysis and thusly you’ve not seen me get net short since 2007. I will at some point turn bearish and get net short, but not in the foreseeable future, as corporate earnings, profit margins and subsidies continue to expand. As usual, I’ll note that such trends are not necessarily good for the broader economy/Main Street, especially the subsidized advantages that giant corporations use to pay a fraction of the tax that small businesses do.

But for the next few quarters at least, I expect those macroeconomic and political trends to continue and with a Federal Reserve that’s set on forcing people into risky assets, I’m expecting the bull market to continue and/or accelerate over that same time period.

So what’s the upshot of all this analysis and how do we act accordingly in our portfolios? I think you want to raise some cash here. And yesterday, I even bought some puts for the first time since the last time the markets were near these highs, in LPS and MS. But I remain mostly net long, with twice as much exposure to net longs and I still have a lot of call options that we bought when stocks were lower that continue to kick in and give me more upside leverage as these stocks have continued to run. I’ll likely trim more of those calls in coming days, as you’ve seen me recently do with Google and FIO and others.

Tweaking, refining and maximizing your upside potential while minimizing your downside risks over and over and over like this is key to long-term outperformance.

Two housekeeping items:

1. Don’t forget this week’s Live Q&A at 2pm EST at http://tradingwithcody.com or email me your question at support@tradingwithcody.com.

2. As of this coming Friday, I will have been alive on this planet for 14,600 days. Since that arbitrary set of days happens to coincide with being 40 years old when divided by 365 days, people tend to make a big deal out of this particular anniversary of one’s birth. So anyway, I’m taking the next couple days off to go on a little break and celebrate my b-day. Monday is Labor Day. So I’ll be back Tuesday on a normal schedule.