Tuesday, June 13, 2006

Don't Make This Mistake

First, I'm terribly sorry for the lack of updates. I've had about eight billion other things to do.

Second, I want you warn you about a terrible mistake I made so you can try to avoid it.

As you know, everyone's been waiting for "the bounce." Even I, bear of bears, figured it was long overdue. I had a bevy of charts that clearly showed that we "should" have a bounce.

Shortly after the market opened this morning, it started pushing higher, and I closed out every single position. Every. Single. One. And the market kept going higher, and I thought I was quite clever to get out.

Well, the market's got an hour left today, and we're down over 80 points. The missed profits from my closed positions could buy a really high-end BMW at this point. From just today alone.

The graph below shows the brief rallies in the midst of this bear markets. I was anticipating another one starting today.

My anticipation - - instead of simply tightening up my stops - - cost me a huge amount of missed profits in a matter of hours, and if I want to get back into these positions, it will be at a much higher price and much higher risk. Not good.

So I feel I have royally screwed up by not following my own bearish advice. For those of you hanging tough, my hat is off to you. This is a different market, and the bears are in control. I should have more faith in my own people.


tjones said...

GFIG and FLEX finishing off h&s formations

you said you made enough for a high end BMW - how big are the positions you take in these names?

tjones said...

GFIG and FLEX h&s formations finished off today.
did you have thise on your list?

if you can buy a bew BMW with your trades today - how big were your positions?

TryumphTrader said...

You'll have days like that. Sticking to my rules I met my targets and got out however had I staied in I would have doubled or trippled my wins.. Ah well.. there's always tomrrow.

Super Bull said...

Trader Tim,

Don't be too hard on yourself. We all made mistakes. Been there. Done that.
But I really admire your discipline not to get back in because in similar situations, I always got back in and lost big eight out of ten times. I think the complexion of the market has changed from bull to bear. This new bear market will last for years so being a papa bear, you should get plenty of chances.

TR said...

Interesting day to say the least. I closed out my credit spread (1200/1210) SPX for a slight loss on the bounce, also closed part of the credit side of another SPX trade I was in. To say the least, I agree we are due a bounce, but the market continues to come up with more and more bad news. I see nothing but selling (recent with the big financials). Think a lot of money is sitting on the side waiting.

I did keep open a few SPX puts at around 1200 since I had some time and they paid off very well. Continue to look for a bounce worthly of closure.

Tim - Keep postin' those trades, I think you are at this point on steroids just knockin' them out!

Good trading all!!!

Denver_Investor said...

phase in and phase out is my motto

never invest it all at one point, or sell it all at any one point

take some profits as you go along

that has worked for me...

however, I made a huge mistake by buying back into gold miners too early; the re-entry prices looked right on the charts, but who knew how deep this correction would get?

so...back to my own advice...phase and phase out, take some profits along the way

this stuff sounds easy, but isn't

cristri25 said...

profit is profit !

Michael said...

Like others have said, don't be so tough on yourself. Many a trader has gone broke trying to catch the exact bottom (and/or top).

ski-board-tele said...

the existing pattern in the INDU most likely continues to point to 10645 with the possibility of 10406 in price with a time pattern of Thursday. Moves of this severity have BIG BEAR scratching high on the tree. If Bernacke is trying to reign in the housing market, no need to look much further than the stocks themselves.

John Wheatcroft said...

The housing market is dead. The reason this market is selling off is simple - most smart traders looked around a month ago and saw absolutely nothing worth buying so they stopped.

In the next couple of days a lot of stocks are going to start catching bids because they are beginning to look good again. The SP500 PE ratio is at the lowest level its been since 95. For those of you who follow Demark methods today was the 16th declining day. One more = 17.

Don't get too overextended on the short side - I smell a short squeeze being put into place.

cristri25 said...

Something is Bizarre ....

Check out 1 minute charts today and look at the last 30 minutes ....


I have never seen something like that....

Can any explain ?

Sanjay Sola said...

Not a bad decision to cover. the markets have fallen 7 straight days now and the Nasdaq has support at 2050. We should get a terrific bounce, which will lead to another shorting opportunity.

specul8 said...

Does anyone else see the divergence on the MACD for both DOW and NASD?

There was a divergence right before this correction and I see an inverse one forming right now. If anyone else here uses Investools, the Market Forecast (which is on the money) also shows ALL lines in the bullish reversal zone.

Looking at Last October, and almost every other time going back, the Markets have a way of retracing back up.

I think when Uncle Ben doesn't raise rates next week, we are going up. Has anyone read the minutes of the last meeting? Will he invert the yield curve further? Does Bush want to derail the economy before November elections?

I think there is a good chance he won't tighten, and when he doesn't the cash on the sidelines should give us a major bounce.

What happens after that we'll see.

LifePost said...

Christi25, There is a ton of index arb and trading programs making up the volume we are seeing lately, hence the high correlation between the indices and stocks. Check out the 5 day on the VIX. The lines are beautiful.

Tim, I too felt we were ready for a bounce. I'm going to stick to my rules though, and stay short until the trend line that has formed overhead the last few days is breached.

cristri25 said...

dont people understand .. BEN HAS TO RAISE RATES !

costas1966 said...

Hey look at it from the bright side. You could have been long on margin on commodities instead of being short.