If you’ve been following me since the beginning of the year, you know I didn’t believe that this run was sustainable.  I have been preparing mentally for this overdue correction that I knew was coming.  It’s just hard to to tell when exactly it is going to happen.  Did we really need bond yields and inflation concerns to cause this? (If that is really what it was) Shouldn’t this have happened more organically and not so much of a knee-jerk reaction?  Both are rhetorical questions that will never get answered.

One thing I do know is that I’m not at all surprised it happened the way it did.  This week was a perfect example of how crazy the stock market is.  ESPECIALLY, on the down side.  When investors/traders/media/etc freak out, they go all out.  The result is the market goes down way faster than it goes up.  There were 2 days where the Dow lost over 1000 points (over 4%) in one week.  On the flip side, during the run, there weren’t any up days over 1000 points, or 4%.  I thank that says a lot!!!

So the question is, how do you navigate a week like this?  I believe carefully and cautiously, because when the market wasn’t losing 1000 points, it had absolutely no identity.  Did you see the charts for Tuesday, Wednesday and Friday?  It looked like a kid scribbling.  Had you shorted on one of those days you could have lost your shirt.  Or bought another one depending on the minute/second you placed your order.  The opposite is true as well.  That is why I write a lot about controlling losses, because if you weren’t using stop losses this last week on either side of the market, you might be hurting right now.

Admittedly, this was my worst week, but not because of the obvious as you’ll soon read.  It was also my most inactive week because I was having trouble gauging where the market was going to go.  So here is a recap of my trading for the week:

  • Monday – The first day of the beat-down.  Started down and stayed down.  So I shorted EA, PSX and GE.  EA and GE hit for small gains, but PSX got away from me and hit my 3% stop.  All that before lunch.  As I analyzed my watch list there wasn’t anything that jumped out at me so I left it alone.  Then 3:00 PM hit!!!  How would anybody have known that was going to happen.
  • Tuesday – I did absolutely nothing.  Nothing was lining up the way I would have liked.  The market had no sense of direction.  It was all over the place and I didn’t want any part of it.
  • Wednesday – Started up.  So I thought I might be able to catch a recovery.  I bought GNTX, T and KEY, but nothing happened.  I sold T and KEY for small losses and GNTX for a 1% loss.
  • Thursday – Was a replica of Monday for the market as well as me.  Market was down.  I shorted SYMC and FHN, for small gains.  Then the market as well as SYMC and FHN tanked.  I’m just shaking me head at this point.
  • Friday – See Tuesday!!!

The big lesson here is the missed opportunities.   Had I not prematurely covered my short positions on Monday and Thursday, I’d be a lot happier right now.  And don’t ask how much because I don’t want to cry.

Anyway, by the time the week ended, I had lost $321.04 and my balance was down to $28,783.04.  Basically, taking me back 3 weeks.  So the goal for this week will be $2057.75 to get to $30840.89.  I have to break this losing streak.  Going into this week the easy thing would be for the market to show me which way it wants to go.  Unfortunately, I don’t expect that to happen.  I may get aggressive in spots and lean heavily on my stop losses.  By this point you should know what my favorites are on both sides and I’m not going to detail it this week because I don’t think it matters.  I’m going to take what the defense gives me.  So have an amazing week and don’t forget to follow me on Twitter and Stocktwits to see what I’m trading and how I’m doing during the week.

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