One thing that we must prepare for while investing is expect the unexpected. Markets often go the opposite direction we anticipate and this time is no exception. We have mentioned that being a good money and portfolio manager is often better than being a good analysts. Not everyone can be a master chart technician, but anyone can manage their money right with a little homework, some simple math and most of all patience.
Often times when patterns like the pattern are so obvious they fail to work. This is one of those times. The current short term is still valid as long as we hold the 10027 - 10187 level. This could simply be a pullback before rallying. A break of this level would signal we will pullback further and 9859 or the 0.382 retrace of the overall swing would be the first level to look for a reversal. A break of 8221 or the 0.682 retrace level MAY be a signal that the correction is not over and we could retest the previous low of 6000. Currently we are looking at the 10027-10187 for a reversal signal to re-enter our previous sell order at 10850. This is where we must let the market adjust like anything else in life as we have rallied 75% since the February low. As the markets mature these swings will become less volatile.
Recap since our sell order at 16500 - We have positions entered at 13700,13483, and 9743. We have closed the 9743 trade at 10850 which reduces our average cost to 12591 as well as cash from the 10850 sell. At the time of sale my feeling were we go higher just hold on, but my strategy said we NEED to take some off here so reluctantly I did. I mentioned that there were several variables that went into making this decision and none of them were emotions. If we rallied higher, we still had two positional trades in the market, however, in the event we pulled back after a 75% rally we had reduced our exposure by 33% and that money could be used for a new positional trade again. Again these trades are in addition to our core holdings, but we positioned ourselves to take advantage of the market either way it moved in the short term. Long term we believe the market moves higher.
Markets often move the way we anticipate but often they do not. The goal is not to be right all the time when looking at charts, but to be positioned to take advantage or make gains either way the market moves.