I use charting for two purposes: (a) seeking opportunities (b) mitigating risk. Part (a) is pretty simple, because I look at charts constantly, and I find plenty of opportunities (which is the basis of this blog, since I share what I think are the best ones). Part (b) is very important to me, because I am religious about having stop-loss orders in place (in spite of the fact folks like my long-time colleague Tom Sosnoff thinking stops are lunacy).
I am neck-deep in (a) already. I’ve got my positions on. Up until last Wednesday, things were going just fine and dandy. On Thursday and Friday, “talk” and “negotiations” and “discussions” were all it took to put over 500 points on the Dow, and things were looking darker.
This weekend, there was a maelstrom of “bad” (for me, “good”) news. All the data from China was sucktacular. Congress seemed more gridlocked than ever. We are down to only about 70 hours until the financial feces hit the fan. If hope wasn’t still pulsing in the air, we’d be down 500 points on the Dow now, at least. But instead, as I’m typing this, we’re down 68. It’s pathetic.
I’m showing a nice profit today, and the easy thing for me to do would be to cover all my positions. The same goes for last Wednesday, for that matter! But why would I do that? Simple. To lock in profits. But what if I did that, and the feces really did hit the fan, and the market begin falling as God intended? I can’t describe what a dildo I’d feel like at that point. I would have taken action based on fear instead of logic. And fear cannot be my master and guide.
I am rational to a fault. I am so rational that I cannot embrace the irrationality that has propelled us to these heights. I’d be better off if I were a pinheaded follower, because it serves so many others so well. But it’s just not me. I have to follow logic, reason, and the cold objectivity of charts and the stops they offer me.
Thus, I remain in place. At any moment – – even seconds after I publish this post – – Harry Reid (which is a hilariously obscene name, if you think about it) could show up, warmly embracing Boehner, as they announce a huge breakthrough to extend the debt ceiling for another 20 days, 5 hours, and fifty seconds, at which time the market would explode higher and all my profits would magically transform into losses. That’s the risk I take.
But things could fall apart (even though, in the words of Bill Gross, the odds are “1 in a million” that they will) and my profits could become much, much larger.
It feels better to take the money and run, but as I said, I can’t base decisions on that which simply feels good. I have to take actions on what makes sense and chance the consequences.
And now here are some completely gratuitous pictures of penises:
