Today Dow down 2.1% and Nasdaq down 2.4%. This is just the way I like it. Selling across all the sectors, with relatively low volume, but bigger volume than last week's up days.
- I liked what I saw, so I added short ETFs: SRS, MZZ today, and added QQQQ and IWM puts.
- All gains last week were erased by today's action.
- I think short term, there are three targets on the down side, S&P 1400, this is the closing low; S&P 1370, this is the intra-day low on August 16th, and new low in 1300.
- Since there is no panic selling, just orderly retreat, I expect the market to go much lower, very likely 1370 if not lower.
- Of course, Fed may cut rate, but I expect them to hold until Sept.18th. If things are out of control, the Fed will not act until the market bottom. Since the Bernanke put is similar to Greenspan put, they cut rate when market bottomed and rallied, since they want to build on momentum on the upside. Both Aug 17th cut and April 2001's cut have this in common.
- I missed FXI yesterday, I felt it's the top, but the puts are very expensive.
- I will watch carefully and see if we can get a real bottom this time and go long at some point.
- Now I have to think we'll have more orderly selling this week.
- Once we get the panic selling like August 16th, we'll have a bottom. I'll call it when I see it.
- The Oct.19th, 1987 lesson is always on us, be prepared for another 10-20% drop, even though the possibility is still remote at this point.
- Ryan, we're on the same page as how the market goes, I think you're the only reader on my blog. This blog is pretty much my own thoughts on the market, and by writing it everyday, it forces me to learn and focus, to improve my trades.
7 comments:
Ha ha ha ... you noticed that and remember my comments. I'm sure you have many readers but just occasionally give comments. Yes, we're at the same page and learning from mistakes. I also put my thoughts and lessons learned almost daily but not in public blog; hence, they remain longer in my memory and I can go back and read whenever I have time (which is never so far). I felt that the hardest thing is self-control. Sometimes it's just hard to follow our own rules. Nevertheless, just keep doing the right things as much as you can eventually it'll become a habit. That's how we can improve our EQ.
ryan
Wait, hold that thought. There's a second reader of your blog. LOL
I read it at least three times a week and it challenges and solidifies my own thinking. One thing I've learned is that it's impossible to pick a top or a bottom. If I'm holding the QID, TWM, SDS, MZZ or other ultrashort positions, I need to get out BEFORE the bottom. So today I sold my ultrashort positions at the end of the day. I did well since Friday. Now I'll wait and enter long positions with MON, HPQ, IAG, CHK, and SLW. I plan to wait until after Labor Day weekend and let the window dressing period expire. If there is going to be a short term bounce, this will be it.
Keep posting! I appreciate it.
David
Ryan and David, hope we all can learn from each other and improve our trading skills.
David, if I remember correctly, you cut losses on QID back in March and April, way early than I did. So I think your timing is better than mine. If you check my portfolio link, I still hold lot of puts and short ETFs. This time I won't be greedy, I'll reduce the puts if I feel there is a panic selling on street, again easy said than done.
Again, hope we can learn from each other and make money.
Well, the best online advice I've received over this last year is from Investors Business Daily. I watch the market trend every day and I don't fight it or pretend I'm better at picking a top or bottom. I've gotten burnt too many times trying to guess when to purchase QID near the top. I also have a goal to net 1k each week. Once I've made that 1k, I move back into cash. This has worked well for months. Most of the time I'm in cash and I take advantage of bigger swings. I'll buy more when the DOW hits 12,450. Until then I'll sit on the sidelines and hopefully watch the carnage.
David
Just wild guess, market could correct to 10% to force Fed to cut rates at the same time to make a double bottom to complete 'the 10% correction' then move higher, OR market could rally towards Fed meeting then sell-off regardless Fed cut rates or not. Market still could go either way from now, so just follow where it's going.
ryan
Ryan,
Thanks for your input. Yes, it could correct 10% but I wouldn't want to get caught with an ultrashort position when the Fed announces a surprise rate cut before September 18th. That would be painful. I believe it is much, much safer to buy great companies on the dip. Regardless of what happens with the Fed, those positions have more upside than downside.
David
Whew! I'm glad I eliminated my short positions at the end of the day yesterday. Today the market retraced everything it gave up on Tuesday. I plan to wait until after Labor Day to reenter the market.
David
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