A RISK ASSESSMENT MONDAY
Risk assessment Wednesday came on Monday this week. I decided to cut losses on TMV and pull out of FAS in the first half hour of trading. I managed to avoid the bloodbath that proceeded during the second half of the day. FCX I will hold. The position is small and I believe the upside is significant from here, with minimal downside risk. I am sitting with a good deal of cash in the portfolio. I'm not going to be staying in cash very long and will likely begin redeploying the cash into new long positions tomorrow morning depending on the market action. In keeping with the spirit of making sure everybody remains on edge, the S&P closed one point below 1100 at 1099. This is a completely fluid situation and my opinions are subject to change on a dime because of that fact. I can say this: I have been involved in market bottoms stretching all the way back to 1997. I am a contrarian at heart, therefore I have a need to zig when others are zagging. There are times when the trend is indeed your friend and going against the stomping herd can get your run over. It is important to use your own best judgment to assess when the proper time to increase exposure counter to the prevailing trend has arrived. If you allow somebody else to pull your strings, your staying power will be limited. And staying power is necessary during volatile periods such as these. I wish I could tell you that 1080 or 1060 will be the trigger. Unfortunately, I have to rely on market action to tell me when to begin putting funds to work. I don't want to rely on arbitrary levels as they are subject to failure. My trade on TMV - long yields - was just flat out wrong. I was way too early, which is another way of saying way wrong. This is a timing game AND a analysis game. When either are off, you are incorrect. It doesn't matter if you have a genius assessment on the future of an asset class. Timing is just as important a component in an assessment to go long or short as the fundamental reasoning behind your investment. One doesn't function well without the other. TMV was a case in point. I'm moving on. FAS was a very small loss. I managed the trade correctly from entry to exit. It's a good time to hit the reset button and begin looking at other ETFs to gain long exposure to the market. The QQQ, EEM (emerging markets) and JJC (copper) look...
THREE DISTINCT POSSIBILITIES GOING FORWARD
If you don't want to fall victim to mental inferiority complex as a result of a bombardment of conflicting information, it may be best to step away. Europe was up last week. The US markets were unchanged. China took a bath as the country heads into a one week long holiday. At least we won't have talks of the Chinese markets tanking adding one more piece of confusion to the puzzle here. By the looks of things, we are destined to take out the August lows. At different points during the month of September it looked as if we may escape that reality. Then 3 days later it would come back into focus. It has definitely come back into focus here as weakness in the market leading tech sector seems to be giving credence to this possibility. I'll have more on the tech sector weakness in the weekly chart review later today. I'm roughly 50% invested and not happy with the results over the past couple of days. If the S&P breaks 1120 this week, I will be raising more cash, most likely at the expense of TMV and FAS. FCX is a very small position that I will keep. The swoosh effect of a break of 1100 is not something I want to sit through just in case I am completely and totally wrong with respect to outcome of such a swoosh. When you have a build up of anxiety and fear with the market suddenly breaking important technical barriers - should the bulls prove unable to step up to the challenge - things can get very ugly...very quickly. A small possibility, but nevertheless, one that should be entertained at this market juncture if you are interested in preservation of capital. It's a confusing and muddled picture. I will attempt to simplify it into three distinct possibilities going forward: 1. We break 1100, take a trip down to 1050 before reversing back up and rallying through October. My problem with this is that a lot of people have been talking about this outcome. Doesn't mean it won't happen, but I don't like having so much company. 2. We find support above 1100 on Monday and begin rallying above 1160 on the S&P. The problem with this scenario is that without the swoosh down to mark a final rinse, subsequent rallies won't have the power they need to breakout of this devilish range. 3. We break 1100 and it doesn't stop. We simply keep going until S&P 1000. Under this scenario every last bull would be rinsed. The worst case recessionary scenario would be priced in. Barring Morgan Stanley...