http://www.stockrake.com

What a week! I don’t mean good either. I went long heavily on Friday and what a bad time to do that. Since then my leveraged ETFs took losses of 17-19%. My QLD calls dropped by 75%. However, I sold out today of the leveraged ETFs and am in 100% cash in that portion of trading funds. However, and more depressing is that I still hold leveraged funds which are probably down now 20-21% since Friday! 3 days of trading! This has been an amazing moves. So far this swing trade is really bad. I think in the intermediate term though it will prove itself. In fact, I can’t remember a directional market that was this oversold, volatility this high, and making big profits for people who could short blindly. Eventually that trade will blow out, and I can’t imagine it going longer than tomorrow and Friday. It will be unprecedented to not see a rather large up move off the oversold levels in the “pick your indicator” rolodex.

I want to talk about some mistakes I made.

1. Mistake: I went heavy long. Fix: I should have laddered in.
- Laddering in would have prevented the large loss.
- A smaller position would have made getting out being down say 8% a lot easier. You can get trapped to a trade when heavy.

2. Mistake: Focused on the bigger time frame due to big intermediate oversold “once every 10 years” signals. Fix: I should have paid more attention to the shorter term time frames.
- Got caught in the big picture when the market was pricing at the shorter term time frame.

Before Monday, I was beating the performance of every mutual fund and nearly 80% of hedge funds out there, but 3 days of trading in leveraged funds erases all that time spent being smart and good. Its ok though because there are still 2 1/2 months left. Yes, I’m barely up for the year and haven’t gone negative like most people in the world right now down 30, 40, or 50% and got caught in 3 historical bad days. Again, position size at the wrong time is the culprit.

It would be unprecedented not to see a big rally off these oversold levels. It even happened in 1987. It happened in 1998. Is it not going to happen in 2008? If the market does not rally off these levels, then the market is pricing in a comet destroying Earth and in that case we’re all screwed anyways.