Well, let's say the things are not really going for the best for my short stock index position initiated on June 29th... It started not so badly and I made a 1-ATR (Average True Range) paper profit before the stocks initiated a rebound on July 7-8th which has some kind of strength. I don't want to face a train coming (I've already taken too many of them, it's a bit unpleasant each time) and for now got out of the position with a loss equivalent to around -0.5 ATR. That's a so-called "whipsaw stop" : while for a given position my risk is of 2-ATR, I believe I'll be better off taking a loss between -0.5 and -1 ATR and get back to the position when (and if) the price comes back to my initial traded price rather than having a 2-ATR stop. I'll have a higher percentage of losses but I expect to have a better expectancy. Keep in mind : focusing on a high percentage of winning deals is a mistake and any percentage above 60-70% should be watched suspisciously as it probably means that the profits are taken too early and ultimately a few huge losses will wipe you out.
Now, back to the bearish view I've started to develop : the more the things go, the more I'm convinced that the mistakes from the past (meaning the Great Depression) are repeated : focus on a balanced budget and on deficit cuts while the economy is still weak, the unemployment high and I think that ultimately if we don't change that, we will return to recession soon. I think Obama has it right and growth has to be priviledged but I'm afraid that he came to a political dead-end and won't be able to support the economy further as it should be. Back to 1932, Roosevelt managed to devaluate the dollar breaking the then sacrosanct gold standard against everybody including among his advisors, the FED, the Treasury and the whole world. Today, Obama lacks the strength to impose more support and to save the world from a double dip recession. The current rally seems to indicate that the time has not come yet for the slump and that I'm probably too early in my short position, but my scenario, which I sincerely hope is wrong, can spend some time to confirm itself and I want to build my position progressively. One week ago I had the feeling, maybe wrongly, that around me, the whole world was bearish and further to the recent rally, the crowd may now be more divided (I start hearing more and more bulls), cheapening the short positions. This said, if the rally is fed by the expectations of a good earning season, I'd said that a lot of it is being discounted now and frankly I can't see outstanding results with a strong dollar, the EURUSD was below 1.30 during most of the quarter : it might soon be summer sales on the shorts!
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