Fall Into the Gap

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Well, we knew this day would come. I’ve written about “the big bounce” several times this month, including this post, in which I said:

As you can see, I’ve tinted areas of support along that trendline. That support worries and excites me. It worries me because the market might find support, as it has before, based on the notion that the “crisis” will be resolved amicably and all will be rainbows and unicorn farts again.

Well, the aforementioned unicorn farts are here, and they sure stunk up the joint today.

At the end of each trading day, I ask myself, “what did I do wrong today?” Even on profitable days, I want to self-criticize, so I can try to (slowly) learn from my mistakes. Today, my only real mistake was being short SPY and QQQ. There was no solid basis for those positions (although, even together, they constituted less than 10% of my entire portfolio). My dozens of individual shorts, I’m totally OK with, and not many of them got stopped out. But having short ETF positions was foolish and unnecessary.

I can balance that somewhat by saying that one late trade I entered Wednesday was shorting the TLT, which I covered soon into the day’s open at a profit, so that took some of the sting out of my SPY and QQQ losses. But the day was not horrific, and I lost about 1.8% during the entire 340+ point run-up, so………I shall live to fight again!

I remain willfully short, although I backed away from the 128 positions I had on Tuesday night. I covered a few dozen yesterday, easing back to 80% committed, but I created some new shorts late in today’s session, so I’m back up to a 90% commitment level with “only” 88 shorts. In case you want to know how many longs I have, the number of them rhymes with ‘hero.” My largest short positions are GLD and MUB, with a new short position in IWM not far behind.

One item on which I am enthusiastically short is The Gap, which is down almost 5% right now after-hours. It’s a lovely H&S pattern. I was going to write about it today (honest!) but I was so busy, I didn’t get around to it until now. I’ve tinted the zone where it’s trading right now.



So I’ll close by saying this: it’s a cinch to beat one’s chest when the market is going their way. It’s infinitely more difficult to take a stand when the world is moving against you. Today was a big yuck-yuck party for the bulls out there, thanks to their limp-wristed pal Boehner caving, as he always does. I think we’re going to crack below the lows we saw yesterday. 1600 is my target. We shall see.