Last week we went against the crowd and went long again after making money on our short position HOV. We decided to do so as market sentiment was overly bearish and trading on sentiment has proven to pay off well over the past few months. This time we were wrong.
On Friday the failed breakout on the S&P 500 proved to be a lead weight around the market's neck and stocks sold off heavily. Most of our long positions stopped out.
Sometimes the market catches you unaware. We have been making money on the majority of our trades for two months now, so staying with the uptrend has been the right thing to do. We got caught pushing our luck on Friday, but that's what stops are for.
The alternative would have been to avoid all risk over the past two months and not make any money.
What we want everyone to keep in mind is that timing the market is an imperfect art. No one gets it right every time. You can, however, make money consistently by making sure you lock it up quickly when you find yourself on the wrong side of the tape.
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