This is a special mid-week post because due to the extreme risk that is currently present I have adjusted my holding time frame from Weekly closing prices to Daily signal triggers on remaining holdings.
While I don't like to adjust rules to fit the near term outlook of the market, the current environment suggests much more caution than we have grown accustomed to. While the market did bounce furiously shortly after the open, all but 1 of our remaining holdings were below their key stop levels.
Rule #1 in my investing process is Capital Preservation. When the SP500 declines 100+ points in 3 trading days and then follows with a 77 point decline, the time to remain hopeful for strong upside is gone. Due to the potential acceleration to the downside, holding for an arbitrary time gets replaced for more prudent risk management.
I don't take my process lightly and to make an adjustment on the fly like this is challenging for me. But preserving your both mental and physical capital is more important that picking the exact timing for investments. When in doubt get out. We can always reenter our positions should things stabilize and new entries set up. We will then be in a clear mindset and ready to rotate capital back into the market.
Three of our remaining four holdings broke stop levels today and frankly we were lucky to get the closing prices that we did considering how they traded early on.
Exiting SBUX
I exited SBUX last week in more aggressive accounts and today was enough to prove that the time to step aside for our conservative accounts had come as well. Seeing SBUX down more than 20% shortly after the open hints at the possibility of what could happen to even the strongest stocks should the market continue lower from here.
Despite the decline off the highs we are still walking away with a greater than 20% gain since late last year. I'll book that and move on.
Exiting UNH
UNH blew out the lower support of its multi month range today. Despite the stock falling all the way to $95 we received quite the gift by exiting back above $110. Could the low have been set today? Sure it could have. You just won't see me betting my hard earned gains to find out. Should it stabalize and turn back higher I would be interested in being a buyer above the range highs near $125.
UNH has been our longest tenured holding for the Lg-Cap Portfolio. Entering on 2/28/14 we are able to achieve a gain of more than 40%. That is plenty for me at this point and I would be happy to reenter should a new trend develop.
Exiting FB
FB dove through our stop and prior breakout level. There is really no question here that the prior breakout has failed and the stock is back in its year long trading range. The market gave us a $10 gift off the lows of the day and I will take it.
Based on our entry at $83.80 on 3/20/15 we are walking away here with very little loss to our principle capital.
Remaining Holding HD
HD managed to hold above its $112.17 stop level and I guess is still holding trend (if you want to call it that). We will see what tomorrow brings, but for now we will maintain out position here until the market takes us out.
--We saw a combo Black Monday/Flash Crash today. Behemoth stocks like SBUX, UNH, FB that drop 15+ % in less than 5 minutes should give you pause. Yes it certainly could be the bottom, but if its not are you prepared to gamble here with your savings? I'm certainly not. I would much rather be operating from a position of strength when the proper support bases signal entries.
Something notable to me is the push-back I have received over the last couple weeks with regard to selling AAPL, DIS and now exiting mostly our entire portfolio last week. It seems that many are too quick to want to jump back into the market here after the pullback. The point I would like to make is that healthy pullbacks tend to come on declining trading volumes after strong uptrends. When the pullback comes on vicious declines where huge amounts of volume is present it is not time to be the hero.
The market is an opportunity maker. There will always be a new opportunity around the corner should you have enough capital and confidence to participate. I said over the weekend the worst case scenario for exiting Friday was that the market could rally and we would look foolish. That is still the case today but due to the current environment I'd rather look foolish with my capital than look bold and be broke.
The market is about living to fight another day. We have done a great job at managing risk and trend. I see no reason to fight this market and force trades that simply are not there. You don't have to be the hero that picked the low. You simply need the capital and confidence to take advantage of the next low risk/high reward opportunity that will come at some point in the future.
Thanks for reading.
-ZT
I don't take my process lightly and to make an adjustment on the fly like this is challenging for me. But preserving your both mental and physical capital is more important that picking the exact timing for investments. When in doubt get out. We can always reenter our positions should things stabilize and new entries set up. We will then be in a clear mindset and ready to rotate capital back into the market.
Three of our remaining four holdings broke stop levels today and frankly we were lucky to get the closing prices that we did considering how they traded early on.
Exiting SBUX
I exited SBUX last week in more aggressive accounts and today was enough to prove that the time to step aside for our conservative accounts had come as well. Seeing SBUX down more than 20% shortly after the open hints at the possibility of what could happen to even the strongest stocks should the market continue lower from here.
Despite the decline off the highs we are still walking away with a greater than 20% gain since late last year. I'll book that and move on.
Exiting UNH
UNH has been our longest tenured holding for the Lg-Cap Portfolio. Entering on 2/28/14 we are able to achieve a gain of more than 40%. That is plenty for me at this point and I would be happy to reenter should a new trend develop.
Exiting FB
Based on our entry at $83.80 on 3/20/15 we are walking away here with very little loss to our principle capital.
Remaining Holding HD
--We saw a combo Black Monday/Flash Crash today. Behemoth stocks like SBUX, UNH, FB that drop 15+ % in less than 5 minutes should give you pause. Yes it certainly could be the bottom, but if its not are you prepared to gamble here with your savings? I'm certainly not. I would much rather be operating from a position of strength when the proper support bases signal entries.
Something notable to me is the push-back I have received over the last couple weeks with regard to selling AAPL, DIS and now exiting mostly our entire portfolio last week. It seems that many are too quick to want to jump back into the market here after the pullback. The point I would like to make is that healthy pullbacks tend to come on declining trading volumes after strong uptrends. When the pullback comes on vicious declines where huge amounts of volume is present it is not time to be the hero.
The market is an opportunity maker. There will always be a new opportunity around the corner should you have enough capital and confidence to participate. I said over the weekend the worst case scenario for exiting Friday was that the market could rally and we would look foolish. That is still the case today but due to the current environment I'd rather look foolish with my capital than look bold and be broke.
The market is about living to fight another day. We have done a great job at managing risk and trend. I see no reason to fight this market and force trades that simply are not there. You don't have to be the hero that picked the low. You simply need the capital and confidence to take advantage of the next low risk/high reward opportunity that will come at some point in the future.
Thanks for reading.
-ZT
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