This Rally Has a Problem
Volume 165 - The Week Ahead
There’s a point in every bull market when disbelief stops being a thesis and starts being a liability.
I think we crossed that line for 2026. The right tail isn’t hypothetical anymore, it’s simply expected. Higher isn’t the issue. The issue is the path, and whether it decides to slap you around first.
Today, we got our first taste of that hostility in the most inconvenient way possible: a futures-only short session sold because of geopolitical headlines.
Last Monday, with spot trading at ~6970 and my book up ~10% on the year, I bought puts. I didn’t buy them because I thought the bull market was over but because Q1 has a habit of punishing people who start the year strong, and as I have said before I have no interest in round-tripping early PnL into the thick of earnings season. There’s a fundamental difference between hedging from fear and hedging from discipline. One happens when you’re panicking, the other happens when you’re ahead and thinking clearly.
Today’s move is exactly what that distinction is for. The structural regime hasn’t changed, but the path absolutely has. This isn’t what I’d call a wall of worry climb anymore, it’s acceptance, and acceptance introduces friction. In this phase, you get paid for being positioned correctly through the chop.
The easy part of this rally is over. We’re past the disbelief and now we are somewhere between acceptance and something more uncomfortable. Participation appears to now have a cost. Mega-caps haven’t contributed for months and they’re about to report. They’re either the catalyst for continuation or the point where discretionary finally blinks. The market will answer that soon enough. But the more immediate question is: what exactly was I hedging for?
The market will always expose who’s running a playbook and who’s running vibes. Nobody gets paid for believing here. You get paid for executing through the turbulence. The difference between riding a 3-5% shakeout and de-grossing into the hole is preparation, not your view on the market. I’ve watched more PnL get wiped by people de-grossing into a 3-5% shakeout than by anyone being wrong about direction.