Today in the ETFP chat room, Jeff aka Mrkt_Rewind mentioned that he is holding a lot more cash than normal to compensate for the potential volatility pick up as indicated by the VIX futures.
In this kind of grinding action, I find “boredom trades” can do serious damage to my trading account if I’m not focused on my discipline. I picked up a small 12% long position yesterday and have already been whipsawed several times in the last two days. The SPX 1,040 area reminds me of walking a tight rope — we tested the 1,040 area 5 times in the last 5 days. Incredible!
There are two key mistake I made during this period. First, I did not wait long enough for short-term oversold conditions after last week Friday’s monster rally. Especially considering the prevailing trend has been down — long entries need to be given stricter criteria. Second, I left the trade unattended as I rushed to work. I could have at least set a limit at break even and I would have been taken out before the late-day down draft (I have a day job).
I am holding on looking for a bit of beginning of month bounce, but I am very glad my exposure is small and I can get out fast on any break down or even flip short. If strength is able to present itself through Wednesday, I will begin to look for short entries by the close or even Thursday at the open in alignment with the overall down trend. Just some current top-of-mind thoughts….
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