So You Want Some Action???

Recently I heard some criticism along the lines of "the account is going down...Do Something!!"

Well, great. Not only does the market suck, everyone's pissed off too.

I want to clarify some things here.

The last round of buying that I did was in early June, when it looked like the leading stocks and sectors (energy and agriculture stocks such as POT, FSLR, MOS, etc, plus some leading international industrial stocks such as CMI) were basing and beginning to break out. I bought what I thought was a conservative amount on the ensuing breakouts.

The result: every one of these breakouts failed as they one by one fell below my stops, which were placed at some pretty major resistance levels. I gradually went into all cash through this process, and lost roughly 1 1/2 %. I wasn't deliriously happy at this turn of events, but I wasn't totally despondent either, because I bet small and honored my risk points...i.e. the trade itself was a loss, but I, FOR ONCE, stayed true to my trading discipline...AND I DIDN'T TRY TO FIDDLE AROUND WITH LITTLE SWING TRADES TO MAKE IT BACK..BECAUSE MOST OF MY LOSSES THIS YEAR HAVE BEEN ON THESE LITTLE SWING TRADES TRYING TO MAKE MONEY QUICKLY.

I also came to the conclusion that: MY OVERALL SYSTEM IS GOOD BUT MY DISCIPLINE HAS BEEN TERRIBLE. I TEND TO OVERTRADE AND UNDERPLAN, ESPECIALLY AFTER A LOSS.

So I came to the conclusion in early June, while staring at a beautiful sunset I might add: 1. Have faith in your outlook. 2. Try to buy the longer moves 3. Wait until the next opportunity arrives.

Well I think there are opportunities right now, and they are on the short side of this market.

A little over two weeks ago, I took a small position in DUG, which is the ultra short ETF that trades inverse the movement of the energy sector. Currently that position is about 5% of the portfolio, and at the time of this writing that position is up 20%.

Today I took a small position in FXP, which is the inverse China fund, because I believe that chart is looking similar to DUG.

If the market weakens some more, I am planning to scale into positions of TWM (inverse Russell) and SKF (inverse financials)

YOU WANT ACTION; YOU'RE GOING TO GET ACTION!!!

Why only go short? I'm glad you asked.

Because the major averages are all trading well below their 50-day moving averages (of closing prices) so if I'm being true to my strict discipline that is simply what I must do. I missed my chance to capture the big downmove in June, because frankly I was emotionally exhausted and just didn't want to deal with the ups and downs for a while.

But I've come to realize that if I've accepted responsibility for this portfolio I simply must act when it's time to act, fear and exhaustion be damned.