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 like areas where I would like to gain exposure.
The risk in investing at current levels is that a break down further opens up the markets for a "waterfall" decline. This is a reality a lot of traders are contending with, which is why I am willing to step in front it. It is when perceived danger is at its greatest that it is, in fact, the best time to increase exposure. On the flip side, it is when perceived danger is at a minimum that it is, in fact, the worst time to increase exposure. Perceived danger at this juncture is as substantial as anytime over the past few years.
We'll see what it looks like tomorrow. I'll update the website during the trading day if I put money to work.
