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There’s a moment every driver knows — when traffic starts backing up ahead and you’re not quite sure if you need to brake hard or simply ease off the gas. You’re still driving the same car on the same road, but the way you handle it changes as conditions change. A clear highway invites steady acceleration, while winding mountain roads demand caution. Heavy rain forces you to slow down, and a sudden fog bank makes you hover between the pedals, ready for anything.
That’s exactly where we are in the market right now. The regime has shifted from the equivalent of a smooth, predictable drive to something choppier and far less forgiving. I’m no longer slightly bullish. I’m shifting to neutral, and more importantly, I want to be on the sidelines with very few positions until the road conditions improve.
This isn’t about fear. It’s about adapting your driving style to the terrain in front of you.
Market Now: We broke below the 20-day EMA on Friday and stayed below it Monday. Volatility has climbed, with the VIX pushing above 22 today, and liquidity has weakened as bid-ask spreads have widened across the board. These are early but meaningful signs that the market’s footing is unstable.
Current Unknowns: Macro wildcards only add to the fog. A potential shift in the Federal Reserve’s leadership could introduce new policy surprises. Major upcoming events like high-profile IPOs — be sure to join Lance, Graham, Nate and Alex at 10 a.m. ET on Thursday for their SpaceX IPO Event! — may create bursts of volatility or skew index behavior. These aren’t risks you can neatly quantify — they’re uncertainties that deserve respect.
The Portfolio Rebalancing You Need to Consider
Here’s what I’m wrestling with and what you should be thinking through as well. When the regime changes, the portfolio must change with it. That means reassessing which strategies still make sense and which no longer offer enough reward for the risk.
If you’re heavily in directional trades, this is the moment to reconsider them. We’re no longer in a clean upward trend where momentum alone carries you. The environment no longer pays you well for betting on one-way moves.
Below are the steps I’m taking and the ones I believe most traders should consider:
- Reduce or exit directional trades that rely on strong trends.
- Rebalance exposure to reflect a neutral stance.
- Build a meaningful cash buffer.
- Prepare mentally for patience rather than action.
The result of a trade does not determine the quality of a trade. Discipline comes from evaluating process, not outcome. A winning trade placed for the wrong reasons is still a bad trade.
Why Cash Is Your Best Position Right Now
Cash is a position — and in this environment, it may be the best one. Consider a recent example: Selling an iron condor offered just $7 of reward for $93 of risk. That kind of profile tells you everything you need to know. When the market pays you that little for taking on that much risk, the smartest choice is to do nothing.
Just like driving into dense fog, this is the moment to lift your foot, stay alert and wait for the road to clear. The opportunities will come, but they aren’t here right now.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
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