When you are short the market and get a 10% correction from the April 23rd highs, it can really put steam in a man's stride, especially when you are leveraged like I am. However, here's the rub: I began adding short positions to my portfolio in April of 2009, taking a sizable paper loss. I didn't go in all at once, but my investing acumen as well as my patience have surely been tested. Just doing back of the envelope calculations, I figure I need the DOW to get back to 8,000 before I start playing with the house's money. You may think I look like a sucker ready to be fleeced, but I'm not going to welsh on my bets. I did my homework and followed my instincts and, when I first went short the S&P 500, I thought it was the right thing to do. In hindsight, I should have waited, but at the time I made my initial investment, I thought I was fine-tuning my portfolio to make a significant amount of money and I still do. I didn't play this fast and lose like many of these fly-by-night traders do, just following the hot money on a second-by-second basis. I've always been an investor, looking at the long-term picture, and what I see isn't pretty.
The market is cooling down after burning it to the wick for over a year. This is a fast-buck business and some of the indices like the S&P 500 have broken through their 200 day moving averages. This may not seem like a significant event to many retail investors, but it is. A daisy chain of mainframe computers are programmed to either sell or buy once an index hits a dynamic predetermined level like a moving average. This may have been what caused the "flash crash" on May 6th, and although the market isn't falling off a cliff today like it did in October 1987, it may have triggered a downward spiral that will last awhile. Star-studded panels of investment gurus will grace the television screens and the business newspapers about what will happen next, but they don't know any better than you or I do. If there is one thing I've learned about investing after 20 years of following the market religiously, it's that you're out on your own.
I've got a dim notion of what to do right now - just sit tight. It's the best thing I can come up with after getting humbled the past 12 months. Let's not forget that we've been down this road before in re to 10% corrections since the market lows in early March of 2009. This may be it and we'll get another pop to the upside. I don't want to be the boy who called wolf, so I'm not going to tell you that we are going to get a 20% or 30% correction or retest the lows or blast right through that resistance level. I've done that before and it will get you nowhere, especially since I've made my investing views public. What I will say is that the mission creep in the worldwide financial sector has gotten way out of control and sovereign debt crisis seems to be permeating the conversation both domestically and over in Europe. For the mean time, I'll keep a poker face and just watch things unfold.