A term used by the late Winston Churchill when referencing his black moods.
http://tinyurl.com/yk4wmcq
There is a variant of the black dog that occasionally surfaces when trading- at least I suffer from it when faced with lost opportunities.
We all know the 'affirmation'- 'Lost/missed opportunities are more easily made up than losses,' or something to that effect. Which is quite true. However, there is often more mental baggage attached to missed opportunities. What am I carrying around tonight?
(a) BAC/JPM/WFC sold at 'giveaway' gains yesterday, in spite of being fairly confident the banking sector would take the indexes higher.
(b) An intuitive take that the sharp sell-off post-FOMC was enough to shake out weak hands-
Weak hands taken out?
Submitted by 2nd_ave (4907 comments) on Wed, 11/03/2010 - 15:11 #73437
Certainly not all of them- there wasn't time for a lot of traders to react. But possibly enough of them to clear the way higher for the indexes.
Any other takes on market direction into Friday?
-was unfortunately complicated by an urge to play both sides-
Opening TZA @ 21.51> Shifting attention to nervous longs
Submitted by 2nd_ave (4907 comments) on Wed, 11/03/2010 - 15:27 #73441
My degree of confidence in this trade is 70% of that in buying the banks this morning- ie, very short time frame...
We all have our own ways of dealing with it. For me, a good night's sleep is usually enough to dispel all traces of the black dog.
In this case, I at least avoided adding insult to injury (or more appropriately, avoided adding the injury of a loss to the insult of selling early) by stopping out of trades in the leveraged inverse ETFs (aka PsOS) TZA/VXX. So I really have no reason to spend much time in the mental doghouse.
2nd - I'm quite sure you will be able to make some sizable gains soon. Just wait for your pitch or until you feel confident that your thinking is clear. I ran into the same trap back in May/June. I was sure the market was going to sell off and yet I still found myself buying stocks and not paying attention to my thinking. I took sizable losses, but I didn't really care because I thought I would have more chances to make up for those losses. I think at one point in June I was up about 10% for the year after having been up about 45% only a month or so before then. I haven't checked lately but I'm definitely way above my April %'s. The market served up a really fat pitch in late August. It has served up about 4 of them this year alone (January, February, April, September), from the long and short side. All it takes is getting the fat part of the barrel on the ball on one of them.
ReplyDeleteThe port was up +0.3% yesterday. Had I held for another day + moved the buy-and-hold into OAKBX for 24 hours, I would be up another +3%.
ReplyDeleteThey probably make a Black Dog somewhere- 2 parts absinthe, 3 parts scotch, spiked with a little propofol.
tof- You're right, of course. I can sulk in the dugout for the rest of the inning, or I can grab a bat and take a few practice swings in the cage.
ReplyDeleteIt's just kind of hard to hit anything with a Black Dog BAC.
ReplyDeleteAlright, time to head off for that good night's sleep.
ReplyDelete2nd- Just wanted to say thanks for all of your great lead posts that keep us all together. While we have a tight little group here, if you think about it, some very good ideas/thoughts are passed back and forth.
ReplyDeleteWhy did I wait for BAC to go green before I added? Simple, if we are going higher, it's got to be on the back of the XLF and a steepening yield curve.
Port- I'm sorry. When I commented on your post last night I thought I saw SRS, NOT SDS. My bad.
Bernanke put out an article today in Washington Post:
ReplyDeletehttp://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?hpid=topnews
Here is an excerpt from that article, where he is justifying yesterday's QE2:
"This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."
So why not just do buy and hold of [whatever] until the end of QE2 in mid-2011, if Bernanke said, explicitly, that he wants higher stock prices?
TOF - I was just pointing out my faults so no worries on the comments. You have to recognize an error in judgement before you can correct it and mine has been certainly been not believing in this rally.
ReplyDeleteI do have some bad news for you guys though. With Bernanke's comments in David's post above along with Obama's comments about extending the Bush tax cuts, well, now I'm bullish. Maybe we can have a correction now. :)
good trading tomorrow
If possible, just try not to be on the wrong side of a global market move. ;) Which I suppose at the very least could simply entail holding a currency which is not currently in decline but there are some bargains to be had in various equities.
ReplyDeleteSay for instance if you were to borrow at 5% and hold a dividend stock at 10%, there's a chance you could extract a 5% gain more or less.
new post
ReplyDelete