This past Labor Day weekend, I had an extra day off with some good drinks, an OpusX and some brats from the grill (and if you don’t know to pre-boil in onions and Lienes– shame on you). If my mother-in-law hadn’t come to town – life would have been good. But she did, and as always- she never leaves. Maybe not “never,” but two weeks of pain & anguish is a damn long time. So while my wife takes the self-inflicted hit (as well she should… I didn’t invite the harpy), the kids I have time to hide behind monitors… and I can author a post.
(Google Mother-in-Law search results… so close to my reality- you wouldn’t know the difference.)
I have learned that one of the biggest challenges for me is to remove my emotions from my trading/investing. I can stomach a loss… it still hurts, but I found out that I can do it until the position turns around. Unfortunately, I also learned (the hard way) that I might not always have the “get the Hell out, you idiot” sense… and can hold a loser through pain – all the way to stupid. I made great returns in SRS in 2007 & 2008, but 2009 took all of those back and more. Over the past five years, I have been iteratively working on a directionally-agnostic market model with which I can both enter, and exit, positions. My 2009 beat-down re-fueled my research.
Just in case you don’t know from my less-than-frequent posts, I consider myself neither a trader nor an investor. I buy, sell, short and cover indices and ETFs when the market says so… think long-term trader or short-term investor. On August 1st, my model flashed a huge short signal (SPX 1287) and I obeyed; initiating short positions: SPY, DIA, IWM.
On August 18th, I wrote the Crazy 88s article – noting that we had broken a major weekly trend line. I was feeling good as the market dropped from 1287 to 1140… and then 1123 over the next two days. I set covers at about SPX 1050 & took a vacation week. By the time I got back on the 24th and caught up with the market, we were up to 1177 again, and my model flashed a cover signal; I closed in the green (not as green as I would have liked), as my fear was that Ben & the Boys were working hard to Jackson Hole me again- but I relied on the model: it said cover, so I did.
The more I tweak it and back test, the more I trust my model. On Sept 2, it signaled “short” again at 1180. I didn’t see much positive in the news for the foreseeable future, so I listened and re-entered. The model held “short” during the pump over the 7th and 8th. It wasn’t comfortable, but I currently remain short.
The other signal that reinforced my position and kept me from covering was the aforementioned 88week MA. Just as it did back in 2008, price kissed the underside of the 88wMA (green zones). To be honest, I don’t know if we’re actually in a green zone, or in some 2011 version of the blue zone.
In either case, I am increasingly more comfortable holding short; provided we’re under the 88wMA and, of course, trust my model to regulate my human emotions.
“One minute you're up half a million in soybeans and the next, boom, your kids don't go to college and they've repossessed your Bentley.”
