Wednesday, October 19, 2011

False Start

In some insane gift from the Roman Gods, it was pouring out this afternoon yet my ride home was normal. Now I have to sacrifice a virgin or something.

False Start
In the last two posts I laid out an idea that animal spirits could get excited enough to play deaf to a multitude of macroeconomic pressures and start a bull run. After yesterday I felt today could be the day for an S&P close over 1230 and more on the way. Nope.

I opened up two positions this morning in the stocks TX and CVLT. TX had made a screen I used in the iBankcoin PPT (along with BRO which went much higher yesterday) and if things took off I figured that would as well. I picked CVLT because this stock leads the Nasdaq by a bit and would be my tell if things were turning south.

After a down open things came back up a bit. By 11am CVLT started flashing me warning signs and I closed it out down 1.2% and later on walked up my stop loss on TX and was closed out at about the same loss.

The point of this post is not to go over what news or what may have caused a sell off. When trading short term not much of that will matter. What matters is I had a clear goal here and a clear exit:
-If S&P closes over 1230 I would already be in two names I like for a run up
-If S&P loses 1220 I would exit no matter what

I stuck to the plan. Until things change and stay changed for a while this market is dangerous and should be treated as such.

That said, at some point things will change. I wanted to be open to the idea that a new leg higher was starting, but I was not hoping for one. I did not need a leg higher but I positioned if one was coming with strict risk control. That's all you can do.

Writer Eli Radke (who is very sharp, stop on by his site at the next link) wrote a great post the other night and in it he said:
"When you lose “too much” , you probably have not stopped losing."

Chasing old losses or hoping for something to happen will not work out. The worst in my mind is needing something to happen in markets. That is the most dangerous mindset to have.

Anyways, that's what I did today as far as market work. As things stand it's more wait and see. Patience is still the only commodity that is rising in value right now. Ticker for the patience futures is PAYSHINZ_F.

Have a good night.


The Sovereign Bohemian said...

You must be stealing all the rain from out west. It's interesting to see your trade picks. This market could make a guy seasick! Keep after 'em Captain.

getyourselfconnected said...

No worries, been at this a long time. Tough market, just looking to make sense of it.

David Batista said...

Because of you I was actually checking today to see if the S&P would close over 1230. Can you believe it? This is ME we're talking about here!

So I thought about you when I saw the actual closing. But, damn, it sure does make me feel better knowing that you're so on top of things. Way to stop the bleeding.

Keep it up, champ! ;)

Jennifer Hillier said...

What David said. :)

I'd ask if you found your virgin but I don't think I want to know.

GawainsGhost said...

There are no more virgins left. You might have to settle for a goat.

One of my pet peeves is the idea some people have that the stock market is the economy. It's not. It may be indicative or reflective of the economy--the real economy is goods and services (MV=PQ)--but actually the stock market is only a daily snapshot of which public companies investors and players are willing to gamble on.

Personally, I think the whole thing is rigged. Most of these investors are institutional, that is pension funds and the like, hedge funds and insurance companies, large investment banks with their supercomputers, flash traders, and what not. These guys have capital and advantages that other investors do not.

As I plow slowly through Reckless Endangerment, I am stunned--stunned!--at how easy it is for these guys to game the system. Meh, simply buy a couple of well-placed politicians, make some donations to community organizers, have them make policy decisions favorable to you and exert pressure on those who don't go along, or when all else fails, cook the books.

For example, did you know that in 1998, when Fannie Mae couldn't meet its growth expectations on which executive pay was based, it resorted to fraudulent accounting, with a little help from Goldman Sachs? The result was over $20 million in bonus pay divided up among 5 or 6 top executives. If actuarial accounting had been used, the amount of executive bonus pay would have been . . . wait for it . . . $0. This went undiscovered until 2005, but by then these guys had taken the money and run away to lucrative positions in the private sector.

It's a sordid tale of corruption and greed. Caveat emptor, my friend.

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