Long & Wrong...

My poor portfolio! It closed out the week:

-1.10% on standard brokerage
-1.06% on Roth IRA

Harry Winston really broke my heart on Friday… -6%.

On the way up, I allowed my emotions to get the better of me. I bought into a Bimbo’s Rally and I bought too much. I became almost as greedy as the PIIGS. But is it really a Bimbo’s Rally? DJIA did not break below 10,000 yet, but USD/CHF seems poised to decline. This is very precarious in my opinion. If USD/CHF really starts declining, then this indicates to me that capital is flowing out of USD into what is deemed a safe haven currency. So the sell-off in US equities would be real and not just related to profit-taking or investor uncertainty. I don’t know too much about currency outflows, but if I’m correct, then this means that investors are basically closing the door. Mind the gap, like they say in the UK.

However, there is MACD bullish divergence on the 15 minute DJIA chart. The most important economic data coming out of the US this week is unemployment and NFPs on Friday. I’m ignoring all the manufacturing data and looking at the single most important factor that would really indicate to us are we looking at a speedier recovery six months from now or is unemployment going to continue to drag the economy down?

We might have to sit through another week of range-bound action and it’ll put a lot of investors in a highly anxious mood and potentially bring DJIA down to break the 10,000 level. If this happens, I’m sure I won’t be the only one crying a river. But I’ll feel your pain. Yes, I will.

What will indicate to us whether we’re really long and wrong? The profit potential in US equities has probably been insufficient for larger investors during this 10-month rally, so if this sell-off is really a bluff – meaning people are taking profit at an intermediate top, scaring out the weaker longs, and then buying back larger quantities again at lower prices, then we’ll all get played like... yes, air piano again! A USD/CHF breakdown, however, would disprove that theory and tell us to hit the parachute. Not literally, though. Any smart guy should know that if they want to break up with me, all they need to do is mention that I go skydiving, backpacking, skiing, or any other such activity with them and I’m out the door. Go yourself, thank you…

But who’s driving here? When we’re trading, we’re the only ones behind the steering wheel. There might be back seat drivers (am I really?) everywhere crying out for us to buy this or sell that, but ultimately we’re the ones driving. And whether our portfolios become a Porsche or a Toyota is really up to us.

In order to keep my sanity, I have to be setting some new standards for my trading.

I either have to say, from now on I will set aside some cash for longer term positions and set aside some cash for short term positions, or if I’m really unsure about the fundamentals of a stock, I have to get out. The problem with me is that I get into a short term position, but once it turns too quickly against me, it becomes a long term position indefinitely. I need to be moving faster.

I’m also looking to offset my stock market pain with some forex trading gain. But I’m looking at February and March to start building some longer term positions in fx.

Even though I didn’t take profit on at least a 10% overall portfolio gain and got into some other stocks at the wrong time (BX, AA, IPG), I don’t regret my portfolio rebalancing. I learned a very important lesson. There are some stocks that just don’t move and unfortunately have nowhere to go but down. So, we have to free that money and keep trying to put our money in stocks or other investments that are going to move. Even if we have to say, you know, we were long and wrong with this one.

I am going to have to keep trying, although I was ready to say: go on without me, Happy Shiny Forex Traders. But then, over the weekend, I got the very expensive idea of owning a yacht, or even any sort of luxury boat would do. I want one with a steamy hot sauna cabin that’s smokin’ hotter than my portfolio. I know… my shopaholism just keeps getting worse.