I am back in Palo Alto, having been away in the mountains for the past week. I would like to say it was a relaxing and enjoyable vacation, but it wasn't – – not because I didn't enjoy the skiing and time with my family, but because my mind was haunted by the topic I'm going to discuss below.
On January 19th, my portfolio had reached a nadir for the year (down about 2%). Over the next 13 trading sessions, little by little, I completely turned that around, and by February 5th, my portfolio was at a new high. I felt fantastic, and I had just had the biggest cash gain intraday of my entire life.
In the subsequent nine sessions, by February 19th, I was right back to where I was before. From the 19th to the 19th, I had come full circle.
I worked very, very hard to get absolutely nowhere. Worse than that is the knowledge that, had I simply covered everything on the 5th, I frankly could have taken the rest of the month off, doing absolutely no trading, and been in great shape. But instead, I face the same challenge, all the while equipped with the same knowledge of what the market is going to do next that all of us have (which is: no knowledge at all).
Now, the whole woulda/shoulda/coulda thing is the hallmark of amateurs, and I rarely indulge in it. The simple truth is that, the entire time, I followed my rules and I acted rationally. On February 5th, none of us knew what was next. What if, on the 5th, I had indulged myself in profit taking, covered everything, and the market plunged 10% the following Monday? I would have been furious with myself, because I would have blatantly broken all the rules of discipline that I choose to follow. That would have been a far worse error.
Still, it stings. I don't like busting my butt for nothing, and the problem I'm facing is one of frequency. That is, I'm at my best as a swing trader (metaphorically represented by the lower portion of the image below), whereas the market is currently behaving optimally for day traders (represented by the top portion of the image). I am badly "out of phase" with the market's speed right now.
So what do I do about this? Become a day trader? No; I think that would be reckless on my part. I suppose I could try to augment my present trading with elements of a few large positions that are more in tune with a day trader's market. But in my heart I think what I need the most of right now is patience. Past experience has shown me that, in the end, technical analysis works, and as frustrating as the market's recent gyrations have been, I believe that utterly changing how I trade would be little different than trading randomly.
Just to add to my gloom, I think bears still have about 20 points on the ES points "at risk"; the wall of resistance is much stronger at about 1125 than it is at the present 1105.
But, for me, it all returns to the chart below of the Russell 2000. I've been trading for a long time, and I've never seen a chart like this before. In my opinion, it spells one thing for market: doomed. And I am fervently hopeful that all my hard work and discipline will finally pay off when what I surmise will materialize finally comes to fruition.
