I was shocked to see the Dow Industrials rally all the way back up after selling off. I was fairly certain that a new sell off was imminent. I guess that's why trying to time the market exactly is a fool's errand.
However, I'm almost completely convinced that if the Dow doesn't make another new high this week, it's game over for buying stocks --- for a little while. The Transportation average hit another new all time high today, and the Dow industrial failed to confirm. This simply means we need to continue to watch the Dow LIKE A HAWK. But I'm growing more and more confident that the time to make big one way bets either way on stocks is a bad idea.
For now, I'm placing all broad market bets on hold.
We won't know if the new trend is 100% confirmed for a little while, but we can start researching now about how we will approach a market sell-off. That way, when the new trend is confirmed, we won't be caught off guard and we can pull the trigger with confidence.
I bought the Vix a while back, as I thought "for sure" there would be a market sell-off 'soon'. What I wasn't considering is that there was no technical or logical basis for a sell-off, given a number of factors including increasingly positive job reports, and an expanding monetary base. I should have waited for confirmation instead of buying with my emotions. Now I'm stuck in a trade and am down 50%. Yuck.
Lesson learned.
NEVER short the market unless you know with a high level of confidence that is based on real evidence that you'll win.
