This Correction
This correction has not been handled well by me – at all. At just about every turn I’ve been either early or late. As a result, I’m doing some re-thinking about my trading style and activity level.
Currently I’ve only got the one short position on IVV with two entries scaled in, both early (of course!), and I’ve set a trailing stop of $0.88 from the last. This way, I don’t have to watch the Fed announcement, bated breath or otherwise, and a maximum acceptable (but rather unpalatable) risk amount is in place with room for it to work in my favor, should there be a “sell the news” after this low-volume run-up to (what I see as) resistance. I will give this one time to work … or not work …
$0.88 from the last equates to about 1423 on the S&P 500, which would make a pretty convincing case for a “W” bottom without a retest of the May 14 lows. It also gives about 8 3/4 points of “wiggle room” in the index to ride a downtrend - just in case that wasn’t the bottom. If it’s a solid “W” bottom, ouch for me. If it’s not, the ouch will be for those that bought the rally.
In the meantime, running scanners for potential longs!
March 20th, 2007 at 9:02 pm
Ken Fischer calls the market: The Great Humiliater
I am in a similar situation to yours, i bought on the 27th thinking it was a one day event. Then hedged with the wrong instrument: GLD. Watching the charts i got convinced of another leg down so i shorted and got stopped out.
The good news, for me, is that i am mostly in cash and testing the market with small positions. Also, i got lucky on couple of the trades which made up for some of my losses.
Here are my two thoughts. First, the market is not going to act according to any prediction. Its job is to prove us wrong. a sharp V move would’ve been too easy. Similarly with a quick retracement and then another big drop within few days. These are the two “obvious” scenarios. The market’s job is to prove both longs and shorts wrong and it did.
My second thought pertains to investment style. I think being fully invested — either long or short — makes sense during a clear trend. Trying to “force” positions just so that you are mostly invested most of the time is not going to work in a choppy environment like this. I think it is best to stay mostly on the sidelines till we establish a trend in either direction.
March 20th, 2007 at 9:40 pm
Bill,
I think your ‘low-volume runup to resistance’ evaluation is spot-on. Seems like we’re in one of those protracted “sentiment tug-o-wars” between the “correction is over” people going long (insane to me, but hey, I’m wrong all the time) and the “the breakdown has finally started” people going short. Mr. Market is cleaning out the stops of both groups as we vascillate. I’m just daytrading and have one short position that’s small enough to set the stop above the Feb. highs. Otherwise, I’m trying to look the other way till I hear something crack! Best wishes!
March 20th, 2007 at 11:26 pm
Bill,
Let us know if you find some longs. I have been searching for the past few days, came up with (1), not filled yet. Still looking…
March 21st, 2007 at 7:50 am
If anything, perhaps you can learn that cash is not always trash? I believe that if you have lost a good feel for the market’s direction, you would be well-advised to step back, go to cash, and take a hard look at what’s going on. Or perhaps even take a break, so that you can refresh, recharge, and reload.
March 21st, 2007 at 1:27 pm
Stopped out, needless to say. That is definitely a confirmed “W” bottom now and an “all-clear” to go long 100%. Assuming it holds 1416 through the close, which looks likely …
March 21st, 2007 at 4:08 pm
Bill,
I could be wrong, but it seems to me like your timing models pointed you in the right direction, but you found chart-based reasons to ignore those signals. Last May you listened more intently, it seems, and nailed that correction.
Really, just a thought,
All the best to you,
James
March 21st, 2007 at 4:59 pm
Thanks everybody for the kind words and input. Definitely I’ve fallen from the horse, but it’s time to climb back on.
See you tonight with some long ideas!
March 21st, 2007 at 8:48 pm
Bill,
I have been watching your recent market timing calls — OUCH!!!! — You have been close to 100% wrong!!!
Please let me know when you switch again and start going long (so I can take the appropriate action and go short at the same time).
March 22nd, 2007 at 7:38 am
Jeff, please post all your market moves for all the world to see, and we can assess your judgment and success rate. I’d much rather pay attention to a truthful man who recognizes his mistakes than a liar who is never wrong.
I admire Bill’s forthcoming style, which is just the opposite of the usual self-congratulatory crap that one sees on internet finance blogs - talking out of both sides of one’s mouth so credit can be claimed whether or not the market heads north or south.
March 22nd, 2007 at 8:15 am
Nova… well said. well said indeed.
ditto the sentiment.