Iggy Says – The Trend is Your Friend

I recently was directed to watch a somewhat obscure Chicago movie, The Weatherman.  It is not the life story of Tom Skilling, but he does make a cameo appearance.  One of the songs in the movie is an old time favorite of mine, The Passenger by Iggy Pop which was originally recorded in 1977.  However, my personal preference is the cover rendition by Siouxsie and The Banshees from 1987.  Since my blogs are supposed to be more about the markets than my musical taste I will move on to the point.

The beat of The Passenger is a very repetitive melody.  Similar to what the stock market has been doing in 2013.  We trend up, no one can fully explain it, and then we have a set-back.  So far in 2013 it has been a slow and steady trend up, much like the beat of The Passenger.  The chart below shows this. SP500

Trend followers will tell you to never question the trend and that terrible saying, “The trend is your friend” does have some merit.  The song which inspired this blog keeps the same pace and melody going to the end.  This can related to the markets as well.  Any of us that have been around more than a year or two can recall that when a market trend ends, it can end abruptly.  At some point, this current bullish run will come to an end.  Options give you many alternatives to be prepared for the abrupt end of the trend.  Being long SPX puts before the song ends is always a thought if you are concerned with the end of the trend.