It's late Saturday night as I am typing this, and I finally have a chance to say a few words about Friday's very interesting session.
I got up very early Friday morning, at about 3:30 a.m., and I felt well-prepared for the day. I was thinking to myself it might make sense to dump half my SKF position and all my TWM position immediately at the opening bell, but that would violate my "30 minutes" rule, so I decided to hold tight.
As my post from Friday morning indicated, I expected a pullback on the /ES to about 1082, and then a fall. Well, we got a pullback all right, but it just kept on – errr – pulling back. So although my initial paper profit at the opening bell was huge, it started to wither almost immediately. I cried "Uncle" and got out of all my TWM (which I had bought Wednesday) and about 30% of my SKF positions. Both were handsome profits, but they definitely would have been better at the opening bell.
So holding on tight during Friday was quite interesting. As I said, my maximum profit was at the opening bell ,and by the peak of the bulls fighting back, 60% of those profits didn't exist anymore. So, at that very moment, the day was still sensationally profitable, but when it was two and a half times more profitable earlier, it kind of stings. But I am not in these positions to whimsically bounce in and out.
The kind of cool thing is that I decided at this pain point to actually take on a big position in SDS and another big position in DUG. The market started to turn back in my direction, but I had to get in the car and head to the airport. So, on that incredibly exciting market day, I had to walk away from my screens.
When it all ended, the /ES looked like the chart below. The tinted area represents what I consider the topping pattern, and the green tint represents my "didn't expect that" area. As you can see, the market slipped away somewhat from its push higher, although it still closed far above its night-session lows.
But here's the cool part of the story – – – – I didn't get a chance to see where my portfolio wound up until Saturday morning (!) So although I had a sense that, in the end, my profit for the day wouldn't be down 60% from its opening bell peak, I had no idea what the final tally was. When I finally got it, I was delighted – – – I was up for the day about 80% of what the opening bell profit was. That was particularly gratifying for me since the market actually didn't slip that much farther from its intraday peak, so it confirmed that I was in some really good positions. The bottom line is that it was far and away the best daily profit I've ever had in my trading career. So I was delighted at our little half-session!
It also just occurred to me before writing this post that I hadn't checked on my 401-k account. I believe I mentioned that I put 100% of my 401-k into the ultra-short (on the small caps) mutual fund with the symbol UCPIX. Here's a line chart of its progress, with a tint showing my short-term target.
Lastly, I took on a new position in DZZ on Friday (which is down about 1% from what I paid for it). This is the ultra-bearish-on-gold ETF. I am learning to fear gold on the short side a little less, largely because gold bulls I respect – Gary Savage in particular – believe we're in for a reasonable pullback. The other thing that is striking to me is the volume – – just look at that volume has been steadily pushing higher.
So, naturally, the big question is – – – what does Monday hold? I found it hilarious (and predictable) how the big web sites were all chalking up Dubai as utterly unimportant in the grand scheme of things (although if the news were bullish, I guarantee you they would be ringing the bell about what a vital indicator Dubai was). But remember this – – – in 2007 and 2008, the shots across the bow were things like obscure hedge funds no one had ever heard of blowing up. And what word was used again and again, as little bits of bad news crept out? "Contained" It was Bernanke's favorite way to explain away the subprime mess: that it was contained.
Well, none of it contained, and I'm sticking to my plan. I remain 100% short and plan to expand the size and quantity of my positions early this week.