I am trimming some gold positions, but leaving most intact. Gold's drop has been largely driven by equity's recent rise. Some of my profits over the past week are over 10%, and I am going to clear some of these off the table to re-enter later. Again, my belief that gold is heading down to the low 700s/very high 600s is still intact.

I'm very busy this morning. My portfolios are doing super (my screw-up with /ES last night notwithstanding……grrr………) so I need to – – you guessed it – – examine stops and, where necessary, tighten them. So I'm going to be pretty quiet today.

I will say that one of my bigger holdings, EWT, is a favorite of mine. It is based on the Taiwan equity market, and I think it's got a fantastic future in the months ahead. Here's the important point – – even if we plunge again with a final wave 5, I don't think EWT will make new lows. This thing has been really resilient. I'm holding on to it, even if we do take another tumble.

The success of my positioning now is predicated on two assumptions: (a) the fall of gold (b) the rise of equities.I have been tooting this horn for about a week now.

Both of these are going along splendidly. I do subscribe to the notion that the current strength is the final rise (wave 4) before the ultimate fall (wave 5) of a major wave down in this bear market. The really meat rise will follow one final lunge downward.

But for the moment, I am enjoying the ride up (in stocks) and down (in gold). I will be tightening stops (err, but not too tight).

Yesterday morning, I was really pleased at the ease and profitability of my overnight short position.

This morning, I would have been pleased at the ease and profitability of my overnight long position, had it not been for a simple, stupid mistake on my part. To explain………

As I've pointed out, over the past few days we seem to be bouncing between about 670 and 690 on the /ES. Late yesterday, as the /ES was hovering around 672, I bought 10 contracts (indicated by the arrow). It inched a little higher, so I bought 10 more. It inched higher still, and I bought 8 more. So I was long 28 /ES in a market that was, 0.25 by 0.25, creeping higher.

Once it got to 680, the position was up about $5,000, and I started to wonder how successful the market would be in pushing through all the cruft in the 680-690 range. My stop had originally been set to 671.75, but I tightened it up to 676.75. At the time, my reasoning for this was (a) the market was slowly creeping higher, so a sudden move was unlikely (b) I wanted to protect my profits.

There was a fatal flaw in this decision, though, and it was this: there was no technical basis for changing the stop. The "support" at the 677 level was barely a few ticks! If the market had been trading there for two hours, sure, there might be a good reason. But the stop price was practically arbitrary. The only appropriate stop was the one I had already set, at 671.75, which was below a meaningful low.

Well, you already know what happened (see the tinted area above). The /ES swiftly made a quick dip, blew me out of the position for a minuscule profit, and then flipped around and resumed course. As of this writing, the /ES was up 13 points. The bottom line is that I made $1,000 on a position which, were it not for my error, would have yielded about $18,000 in profits.

Stops are not just important in my trading – – they are an absolute requirement. But "protecting" your profits with an unnecessarily tight stop can sometimes have the opposite effect of blowing up profits that are apt to materialize.