Monday, April 18, 2005

The market didn't crash!

Ok, I didn't really expect a crash today. It seems to me markets don't crash when all of the sentiment indicators say that we are at an extreme bearish reading, and the put/call ratio is high, but what do I know? I've never been in the market during a crash.

I bought the market every day last week, with my most bullish purchase on Friday at the close. Over the weekend I had nagging doubts, as I talked to my friends. It seemed most people weren't really aware of the extent of the sell-off that we had last week, which contradicted my feeling that the negativity was all priced in. I felt better Saturday Night. Flipping through the channels, I noticed the market decline got mentioned on Weekend Update of Saturday Night Live.

Anyway, I was a buyer almost every day last week. I tend to distrust volatile action during options expiration, and on top of options expiration, we had taxes. I was thinking that with the market down, people might be inclined to sell stock in order to lock in some capital losses to deduct on their tax returns, and that this could be aggravating the situation. Cramer had a column on with another tax angle. He said that the AMT is hitting more people than usual this year, and this is forcing people to sell in order to pay their unexpectedly large tax bills.

The May options portfolio is holding up ok except for 2 positions UNH, and TWX. I bought both of these guys right after the fed notes came out and the market had that huge reversal to the upside. I had been watching these 2 stocks, and was worried that I wouldn't find any more ideas for the May option portfolio. What a big mistake chasing those stocks was. These 2 positions are now close to being in the money. If I had waited a day or two I would have been in a much stronger risk/reward position. Furthermore I ended up finding plenty of other stock's to fill out a full portfolio for May expiration anyway...many of which were much more attractive than those damn TWX puts. I saw that the CEO of UNH was to appear on Cramer's mad money today. Unfortunately I had an appointment and had to miss the segment. Here's hoping he can pump up the stock. (I'm not optimistic.) I'm very dissappointed with myself for getting cought in that bull trap.

This is why I need to develop some good trading systems. Whenever you are trading on a discretionary's so easy to make huge lapses in judgement do to one's emotional state. My heart-rate was elevated while I made those trades. That should have been my first sign that they were a bad idea. It's been a long time since I've felt any kind of emotional response while actually making a trade.


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