Didn't Sit Tight

“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”- Reminiscences of a Stock Operator

The above is my favorite quote from Jesse Livermore's book.  It is harder to sit on a winning position and hold than to sit in cash and hold.   Especially for the counter trend trader, who by definition, is looking to sell after a rally and buy after a selloff.  That is the one big advantage of trend trading over countertrend trading:  bigger winners.  

There is a price to be paid for having the optionality that cash provides.  When stocks keep going higher, you are left in the dust, pounding sand at the thought of "what if, I just held a few more days..."  

There is a big difference between making money in trading and trading well.  I made money last week taking advantage of a great dip buying opportunity, but I didn't trade it well.  I sold earlier than I originally planned and didn't give the market sufficient time to make even more just by sitting on my positions. On to the next trade, to try to execute better the next time. 

We are in the late 1999/early 2018 style sell bonds buy stocks rally phase.  This is when bond and cash holders feel like suckers for either being flat or losing money in bonds and envy those that are all in on stocks.  I am already envying those who didn't sell last week on the V bounce and are still holding longs.  I am paying the price in lost profits, which is still painful to experience when I knew the bubble would keep getting bigger, and I decided to try to play for the optionality of going to cash to be able to buy a dip.  And that dip will be coming from much higher prices, with no guarantee of reaching my desired entry level below SPX 3750. 

The speculation is rampant, as biotech is the main recipient of speculative cash flows.  The Rona stimulus package, is not really stimulus but dollar debasement.  When the stimulus is paid for by Treasuries that the Fed will eventually monetize, that is pure dollar debasement.  It benefits people who spend dollars quickly, and punishes those holding cash to spend at a later date.  That is the main effect of the stimulus.  In other words, all these huge spending packages do is cause inflation, and the market has caught on to that realization.  As crude oil trades even stronger than the SPX despite the lockdowns and Rona still almost everywhere.  The commodities market will be the long term winner of this dollar debasement.  The losers will be the conservative savers who parked their money in bonds.