Failed Breakout

So since I have last posted I finally took my Level 1 CFA exam and have that out of the way, and while I feel better than last time I still don't feel great about it which is annoying and now it's a waiting game.

In hindsight the best thing to do after I essentially sold all of my positions was to stay in cash for the last week before the test. When we had the opportunity to sell off and didn't I took this as a bullish sign and decided to get back into some long positions in anticipation of the next leg upward above 950 towards 975 and likely the 1000 level. I basically got in a day too early, ALL of the positions I got into came down to much lower risk support levels and entry points. Obviously I can't predict this but patience would have served me well. Balance would have served me better as well because it was the first time I have been completely long with no offsetting hedges which made the moves much more painful. This is exactly the position I don't want to get into where I have large down moves and smaller up moves, you want the opposite to be true. Obviously I can recover from this, it hurts mentally more than monetarily but again I seem to have a hard time getting away from a certain level in my account. It could just be coincidence but since we have essentially done nothing for the past month and I haven't seen my account do much either that likely forced me to be impatient and take risk at a bad time. I have since offset my calls with puts and am still long biased but today they weren't much help.

I still feel that the market is overall wanting to move higher because we have the psychology of the market in that direction. Those who trade trends are thinking that they should buy dips until it breaks and with a seeming majority eventually expecting a recovery people don't want to be late to the party especially if they are already 30% late. In reality there are some signs of stabilization and the jobless claims number was much better than expected even though unemployment is already close to the projected high for the whole year and we are only half way through. The odd and frustrating disconnect in one position in particular are the dry bulk shippers. The baltic dry index is at new highs, significantly higher than a month ago, yet the dry shippers are not at new highs. I was hoping to exploit this inefficiency for a gain but it has gone in the opposite direction so far.

The ending result was I had a breakout in my account to new high returns of 169% but have since fallen back down to 150%. That is too much volatility for my liking. I used to like seeing large moves but realistically making steady upward progress is much better and suffering large drawdowns is not the way to do that. The market still seems to be unsure on which way it wants to go. Now that I can once again devote my full attention to the market I will look to regain my performance using the same strategies that have worked all year. Position sizing, balance and patience.

Total Return for 2009: 150%