This week all bloggers are permitted to show retracement levels with impunity, so I shall not be suppressing them here. The closing of my /ES short on Friday has me even more irked at myself since, right from the get-go, the /ES is down 10 as of this writing. Anyway, painful though it may be, I cannot responsibility short the /ES here, since the stop would be miles away.

I'm not sure precisely what's behind the plunge since I'm badly behind on news. I did read that the Obama administration was irked at the restraints on executive compensation which Congress put into the stimulus package (ummm – if this is true, Good For You, Congress!) It's kind of weirdly amusing that Congress would actually create a more populat package than Obama wanted!

I also heard that Wednesday would be the day that Obama provides the Get Out Of Jail Free card for the nimrods who bought at the top of the market and want part of their principal forgiven. I'm nervous about how the market will react to this handout, since it was so favorable to it during Thursday afternoon's debacle.

The view from my residence, and a friendly snow-covered bear……..

Greetings from Prophet North – – – my comfortable abode in North Lake Tahoe where recent storms have left the trees thickly covered with snow.

Imagine for a moment it is April 2000, and the NASDAQ had just started its plunge. It was clear things were bad, and investors were happy that their $100 per share stocks were now $70 per share. And let's further assume the government – for whatever reason – wanted to protect people from suffering the penalties of their bad decisions and introduced the Security Stabilization Act of 2000.

The act, let us suppose, guaranteed that the US Government would purchase any common stock from any U.S. Citizen for 50% of its high price from March 2000. This offer would be valid until the end of 2000 and was introduced in order to provide confidence to a very nervous market.

What would have happened? The market would have fallen, more or less like it did in real life, and individual stocks would suddenly stop falling at around the 50% mark. Immediately after the end of 2000, most stocks would have resumed their plunge. The government's money would have stalled – – but not prevented – – the eventual outcome.

This would have been silly, naturally. What happened instead was that the market fell and fell and fell and eventually stabilized. The loser stocks (like CMGI) whithered away and died, as they should have. And the ones that truly had good businesses (like GOOG and AMZN) represented fantastic buying opportunities for those savvy enough to recognize them. The market cleaned things out, and everyone was better for it in the end.

This thought occurred for a couple of very similar reasons. First, a thoughtful reader sent me a link to the web site AngryRenter.com, whose basic premise is that the artificial floor being created by the government under real estate prices is making it unattractive for people who would love to buy a home (at the true market price). The very next day, a good friend of mine…..who has a no shortgage of money…….also lamented how he and his wife would love to buy a nice house, but they knew that prices were not being allowed to reach their true price.

See how perverse this is? There are people with spotless credit and plenty of money who want to buy houses, but they are economically rational enough to delay doing so simply because of the distortion to "helpful" government is provided. I need to get the kids to bed, but I wanted to get this quick post off (and the thought off my chest).

In a quest to get a post out before I get consumed in the world of family-packing, I will share one quick thought…….

Even though I am typically in many trades, the S&P e-mini future (which I refer to frequently here with the shorthand /ES) is my "backbone" trade. I trade it the most frequently, and it is the principal driver behind my profits (or losses, as is sometimes the case).
When the /ES is moving more or less in the direction I am positioned, it is a cinch to trade, because I simply keep ratcheting my stop down and let my profits grow. Tuesday was a superb example of this: it fell steadily all day long, and my profits on it just grew and grew. It's great that all my other positions were also moving the right way, but my core position in /ES was the reason behind my gains for the day.
Thursday, as you know, was a debacle, because the final 50 minutes of the trading day completely erased all the day's losses.

Some have puzzled as to what the big deal was: after all, if I ratchet my stop down all day long, what's the problem? Didn't I just get stopped out partly into the rise and still have some profits on the trade? No, I didn't, and the reason is that my entry price was a lot worse, and the day certainly didn't have that "stair-step all day long" characteristic that Tuesday had. It was a much sloppier trading day for me.
But that's not the point of this post. Thursday was a bummer, but I didn't fundamentally screw up in any way. Today, however, I had "Thursday on the brain." By that I mean I was short 10 /ES and was nervous about the position all day long. As the /ES inched up toward 835, moving into slightly positive territory, I freaked out and closed the 10 contracts in a hurry, feverishly hoping to avoid a rush up to God Knows What Price.

I was scared. I was worried the final hour of the day would be some kind of carnival again.
What really happened? It didn't get more than a point or so higher than my closing price, and toward the end of the day, the /ES started moving down, closing at 820. So I throw $7,500 into the gutter because I got scared. (15 points with a 10 contract position equals $7,500).
That was stupid, foolish, and unnecessary. I was trading emotionally, strictly out of fear of what had happened in the recent past. A stop at 840.50 would have made sense (the high of the day), but squealing like a little girl and fleeing the trade was just……pathetic. Take my advice. Don't behave like I did on that trade today. You'll regret it, as I am.
I'll be driving through a mountain of snow tomorrow morning on the way to Prophet North, so pray for me. I'll see you online sometime during the weekend (it's Valentine's Day on Saturday, so Mrs. Bear will be getting most of the attention).

Folks,

It's probably pretty obvious that I've been MIA from the comments section over the past twenty-four hours or so.

I will be preparing for a week-long vacation for the rest of the day, although I'll probably be able to do a brief post this evening. Although I'll be on vacation, I'll be doing regular (albeit less frequent) posts all during next week.

Thanks, and I hope you made it through all the chop OK today.