MY TEACHER TOLD ME I SHOULD NEVER TELL A LIE, ESPECIALLY TO MYSELF
The targets and scenarios I share on this website serve as my yardstick. They are a measure of the accuracy of my analysis. During months, like October, when my analysis all comes together so beautifully, the trades just come together in an effortless fashion. I know that I am right by the manner in which the market confirms my targets, ranges and velocity with which I am expecting the moves to take place.
When the market moves outside of the ranges I am expecting, I have found it safe to assume that I do not understand the current market conditions. When I do not understand the current market conditions I absolutely have to get out and rethink my analysis.
Believe me, I have tried in the distant past to sit through markets I don't understand, hoping that in time I will gain an understanding by sitting through losses and allowing the market to morph into my "understanding field". It doesn't happen.
If your analysis is off (read: you are losing money), then you do not understand the current market environment PERIOD. It really is that simple.
My becoming bearish as a result of several very convincing indications of market weakness was incorrect. It doesn't matter if the market starts dropping tomorrow, the analysis was still incorrect. Why? Timing is as much a part of the picture as any other component. If I understood the market here, I would have timed it appropriately.
With that said, I cleared out of all my positions today. I am back to 100% cash. I tweeted yesterday that I was expecting a move to 1250-1260 on the S&P today. I got a move up to 1250 in the morning and then the reversal that I was expecting. What made me realize that the market was deviating from my roadmap is when after mid-day it just kept rising and rising and rising.It ended the day over 1260. The 1260 level was the extreme of the upside range I was expecting. The fact that it ended over that level is one more sign that I should step back.
I'm back in cash. The trades were all very small losses overall. I am certainly happy about that. As far as managing the trades goes, I couldn't have done a better job.
Sometimes that's as good as it gets.
