For the last eight years during this Bubble-Blowing Bull Market (BBBM), every time the currency and/or Treasury markets have made big moves with velocity, I’ve rightly analyzed those moves as temporary because they haven’t been meaningful enough to burst the BBBM.  We’ve used most every previous pullback in the market during the last eight years to nibble more stocks and have even made some huge gains on buying call options during those prior panics. But…

How many times over the last eight years have I written something like:

“It’s not the direction or the magnitude of currency movements that causes me sit up and take notice, it’s usually the velocity of currency movements. That is, extreme volatility can indicate something underlying that actually matters. With Treasuries and with currencies, the trends can stay in place for a rather steady long time vs. say stocks and commodities. And so I rarely factor dollar/currency movements into my analysis and outlook for the stock markets and other markets we invest in. But when the dollar and/or the Treasuries suddenly changes direction and/or puts on a big move in one direction over a small time frame (say measured in days instead of a slow turn or slow big move build up over months or years), then I start to dig a little more on what might be causing that movement with such velocity.”

So think about that for a minute. This time, these big moves in the currency markets and bond markets and Treasury markets are hitting with stock prices that have gone through the roof over the last eight years and have gone almost parabolic in the last year. Sentiment amongst traders and retailers has been very complacent and even cocky for the last year. Bitcoin and the cryptocurrencies have crashed 70% or more from the levels they were trading at when I published my book calling for The Great Cryptocurrency Crash less than two months ago.

Has anything thing changed since stocks hit their all-time highs back a week ago on January 29? Yes, let’s repeat that last paragraph and note that these are tangible changes:

This time, however, these big moves in the currency markets and bond markets and Treasury markets are hitting with stock prices that have gone through the roof over the last eight years and have gone almost parabolic in the last year. Sentiment amongst traders and retailers has been very complacent and even cocky for the last year. Bitcoin and the cryptocurrencies have crashed 70% or more from the levels they were trading at when I published my book calling for The Great Cryptocurrency Crash less than two months ago.

So, I’m not turning outright bearish and selling everything like I did back in October 2007, the last time the stock market put in a real top and had a subsequent crash, but I’m definitely thinking the being cautious is the right idea. The best risk/reward play right now is to make sure we’re not going to lose sleep if the market does fall another 20-30% from its all-time highs. Don’t try to game the day to day swings. There are going to be some great buying opportunities in coming weeks and months.

Now it’s certainly possible that these recent crazy moves in the bonds, Treasuries and currency markets settle down and revert back to the mean. Just like they have every other time they’ve gone crazy in the last eight years. That’s actually probably the most likely scenario this time too. But I’m not in a rush to catch a potential bottom here and I’m not going to be greedy.

Remember our mission as I explained it back in 2012, for example:

“Trading With Cody is to help you make big money and protect your capital over the next 10,000 days, not the next 100 days.  The key is to get more investments and trades right than wrong over our entire investment/trading career and to maximize our gains in those we get right while minimizing our losses in the trades and investments we get wrong. I’ve been high-profile trading and investing successfully for a very long time now and while I’ve got no magic bullet for you, I am quite confident you will become a better investor and trader by reading and following the lessons offered in this book and here on Trading With Cody.”

I’m not going to force any trades here. I’m going to remain cautious. I’m going to keep a few put hedges on here and trim them if the markets tank further near-term.

Nobody said investing/trading/money was easy.