Head Faked By the Market

When it’s too good to be true, it probably is.  For days the market had been fixated on Bernanke’s speech scheduled for today from Jackson Hole and had rallied this week on speculation that the speech would hint about QE3.  Even I was prepared to add to my bear ETFs and endure the impending pain on today’s event.  Well, the market first gapped down because of the overnight news that Germany itself wasn’t strong enough to bail out Greece.  Then the Bernanke speech came out at 10 am today and didn’t mention a word about QE3 and the market sold off big time, well only momentarily.   The SPY was down over 1.50%.  I was initially ecstatic – thinking the pain didn’t last for more than a day after all.  My red position had turn nicely green.  Then I fell prey to the market as it started to bounce.  I started brooding on the fact that I was only 25% loaded.  So as the market reversed, I had assumed it being a dead cat bounce to back-test (at most) the red gap.  As a result, in the process I’ve increased my position to 50% (greed anyone?).  To my horror, the market not only finished up 1.50% but finished near the high of day.

At the end of the day my portfolio value was no worse than the earlier this week, but I was mentally defeated.  Not only did my day’s gain go from green to red, I’ve doubled my position without any improvement on my cost basis.  The way market fooled me and most bears today would most probably mean it’s prepared to go higher — in addition to what’s indicated by MACD, RSI, STO, bullish percent index, and sentiment.  Being now 50% loaded instead of 25% means that the pain on the way up during this bear market rally (or bear flag) is going to be that much more painful.   Had the market simply gone up today with me adding 25% more (thus better cost basis), or had it simply sell off and prevented me from chasing (I’m a bottom fisher and wouldn’t normally chase), I’d have been in a much better shape than what had transpired.   It was an understatement to say that the day had ruined my weekend, having realized that the bear flag still have a ways to go:

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