What a difference a day/week makes...

The day after the last post, I was riding high.  The portfolio reached as high as $18,500. The market rocked and everything seemed to be rosy (which made me wonder if the end was near).  Anyway, since then, the portfolio value has retreated back to around $15,000, I am about 90% in cash.  And there appears to be no end to the misery.  My current positions are a debit spread on AOL (about a 50% loss), Sprint (20% down), PHM (about break even), GTI (closed 40% of the positions at 100%, looking at 100% loss on the rest, resulting in a slight overall loss unless it reverses before Feb expiration), SYY (looking at losing most of the secondary investment - the original returned several hundred percent), HD (Home Depot) - 90% loss, and DRYS (DryShips) is looking at around a 65% loss at the moment.  I regrouped and closed out my GroupOn positions yesterday, along with the remaining 1 AOL option (that was not part of the spread) in order to raise cash.  With a strong market day yesterday and a strong opening this morning, I was surprised to see the DOW down 200 points soon afterwards.  Now I am glad I raised some cash.

Looking at the market using DOW's Weekly Chart, we see that there is a possibility that we are in wave 4 in the long term trend.  This means that eventually this can turn out to be a bear trap resulting in an explosive move to the upside (Wave 5).  However, I don't wish to have all my eggs in that basket until I see evidence supporting it.  I like the economic news for the US.  The sell-offs in Asia have me baffled a bit.  However, if you have ever read Jesse Livermore's book, he used to say the market does what it does.  When people ask him why the market went up/down, he picked up the paper and just pointed to a story and said that's why.  My philosophy now is to let the market tell me what I should do.  After things being rosy and most of the trades being profitable, all of a sudden most of my long trades are losing money.  That tells me to lighten my exposure, step back and reevaluate.  Sometime that means going to cash and waiting to see which way the trend will go.  

And while you are waiting, enjoy yourself, take a break and enjoy the feeling of being in cash while the market whipsaws the bulls and the bears.