After last week’s bona fide roller coaster ride (where the Dow down 634 on Monday, up 429 on Tuesday, down 519 on Wednesday, and back up 431 on Thursday), this week the markets showed modest bounce out of that violent congestion area. But today the market dipped right back down into the area again with the S&P down 4.5% and the Dow down 420 points. It started with Morgan Stanley lowering the global GDP forecast sending overseas markets plunging. Then at 8:30 am, the CPI and new unemployment claim reports put icing on the cake, showing inflation grew .5% month to month and the new claims filed were 13,000 more than expected. The result: a 2.65% red opening gap. Then at 10 am, the Philly Fed Survey delivered the knock out punch: instead of 4% industrial production growth, it reported -30%. On that data, the market dipped anothing 1.76%.
During the bounce earlier this week and last week I’ve been liquidating quite a few long positions: MSFT, LNG, CSCO, ABVT, FCEL, CREE, LFC, and (unfortunately) GLD, and at the same time slowly accumulating SPXU, SDS, FAZ, and TZA. Why “slowly”? Because the S&P 500 index could bounce till as high as 1250 if we go by textbook TA. On the other hand, there is no guarantee the bounce would go “as planned”. So in order not to miss out the eventual retest of the low, I could only scale in. As of yesterday I was only nearly 1/3 in with my short positions.
And today’s unexpected sell-off proved that I did the right thing. It wasn’t without pain, as I stated previously as I started to accumulate bear ETF’s — I knew I was in for some tribulations as I was fading the rally. Yesterday at the intraday market high my portfolio made the all time low of $128,500. Today it saw some $3,700 improvement. But because I only had 1/3 short position, I didn’t take any profit today as a compromise. Smaller position equates to longer leash; bigger position equates to shorter leash. I think that make sense in both the psychology and money management aspects of trading.
I owe much of my steadfastness of my bearish stand to the SI Indicator. Unfortunately I am not permitted to write anything about it any more. But there, I give the credit where the credit is due.
Portfolio Value: $132,200