Here Comes The Rain

After last 3 sessions’ torment where the 50% Fib retracement was breached, the rectangular target reached, and the 50 day EMA resistance teased, relief finally came today for my 60%-in short positions.  The employment data showed that non-farm payroll had 0 job added last month and the market tanked.

At the high in the past 2 sessions where the 50 day EMA was tested, my portfolio value was at sickening $122,000 level.   Because my cost basis was so poor and I was something like $10,000 in red, I had to take some off the table at the red gap open just to catch a breath of relief, and then some more at the 20 day SMA support near the close of the day.  Effectively, I took off 20% of my short position and I’m now approximately 45% short.  This is the price I pay for having bad entries.  While I have to admin I am being a sucker where I added my shorts at all the wrong places and now exiting some positions just as the market turned down, I feel somewhat justified with what I did today:

  1. The 60 minute chart was already oversold even before today’s sell off, so there was a good possibility of a short term bottom upon the red gap.
  2. The short term trend was up as per just about all TA’s and all bloggers I follow.
  3. The sentiment spread was down to single digit (40.9% bull vs 36.6% bear), favoring the bull.
  4. Despite the big drop, it could be viewed as just filling Monday’s green gap.
  5. We’re right at the 20 day SMA support.

The unfortunate or sad part was that I didn’t exit my positions today to take profit, but to reduce my loss.  Since I’m such sucker, even with today’s selloff, I’m still in red.  This is exactly the pain I was talking about last week as I was fooled and the market began its bounce — that I’d have a long suffering ahead just to get back to even, much less profit.  So I am not exactly happy today; nonetheless, I told myself to count my blessings.  At least I can enjoy the Labor Day weekend with less stress.  I am now in better shape in terms of the appropriateness of my position size.  I have lots of powders if the market bounces higher.  Alternatively, I can ride with my remaining sizable (albeit it smaller) short positions should the market decide to make a new low without testing the 125 neckline.   Let’s face it, unless I’m 100% certain, which I’m not, that the market will make new lows in the face of the short term uptrend, my short position was recklessly large before today’s trim.

Quote from Jesse Livermore:

“A man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall St nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. “

Portfolio Value: $130,300

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