Seller's Remorse

I took my last position off in the XHB today and am sitting in all cash. My plan is to wait for a solid pull back in stocks as I think they are getting ahead of themselves and we are fairly overbought. Had I held onto everything through today I would have made a few more percentage points. Had I bought back after selling when I had thought about it yesterday I would have likely made at least another 10-15%. However, in trading you can't think in "could haves" otherwise you'll go crazy. My only regret is that I didn't trust my instinct and so far my timing has been very accurate.

For now though I am OK leaving a few percent on the table, given the fact that in essentially a month I have had what some people would like in a few years. On top of that I have not done it with a lot of risk(seriously it's true), I have been patient and waited for entry points and managed risk and let winners run as needed. I have used the charts as well as some logic and macroeconomic viewpoints to pick out some very good relative strength candidates.

At this point in time I think the upside is limited in the short run, likely the S&P 850 is the upside maximum unless we work off this oversold condition first before resuming. The one thing I want to be weary of and not do is become paralyzed by performance numbers. I don't want to be too scared to take on new risk in fear of losing the ability to say "I have X% return this year". I think that partially happened with my decision to not get back in after selling. The reality is I could take 5 new trades and lose on all of them and still give back only 10%, but as this example shows you need to take risk to gain reward and those positions could keep running until S&P 850 and beyond. The truth is you don't know, you just have to manage your risk properly.

Sitting on a nice percent gain is literally like sitting on a position that is already profitable. It helps emotions a great deal, at least my emotions anyways. In my mind I feel like I have the luxury to sit around and wait because this month was so good there is no reason to rush out and take on risk just for the sake of being in the market because that will likely produce bad trades. Patience has worked so far, so why change now? We are in an uptrend in the short run so as that continues I will continue to buy on pullbacks and scale out into strength until the trend changes. I have my spots chosen as to where I'd like to get into positions so I'll wait for things to come to me, and if those don't work there will be plenty of other opportunities that present themselves.

I am curious to see how the month end plays out. Futures are down about .5% right now, will profits be taken at some point or will we see window dressing all the way into next week that may in fact coincide with us getting to the 850 level? Our subsequent rallies have gotten smaller and smaller lately, we had a hard time getting above 820, and only got to 832. This could be a sign of a good bull trend starting as moves get smaller and more predictable but the VIX has yet to break below 40 meaning there is still expectation of volatility ahead. We shall see, if I take on any more risk I think it will be minimal and more delta neutral. Earnings season will likely be when we find out if this is a short term top or if it has fundamental legs...