Our very own Big Bob claimed the rally over when the DOW reached 10,000 back on October 15th and while I questioned it at the time, we soon had a brief pullback and I thought Bob must have some insiders at the Plunge Protection Team feeding him info. I eventually got out of most everything of my short term portfolio and decided to wait out the year in cash. Today the Dow closed right around 10,500, so Bob ended up leaving 5% on the table. He did say that he was helping out the economy buy spending his profits instead of hording them underneath his mattress.
My plan was to stay in cash ….but my ADD got the best of me and I decided to chase Gold when it reached $1,190 an ounce right before Thanksgiving (breaking a rule I have about not chasing something that seems to be going up in a straight line). I bought four futures contracts (each contract equal to 100 ounces of Gold) and a couple of call options on the GLD ETF. I woke up the other day to see Gold had dropped $60 an ounce while I slept and made a decision to add to the position rather than get out for a huge loss. Broke my number one rule, “Don’t add to a losing trade”, but it has worked out. This evening I see Gold trading over $1,200 an ounce . I’ve scaled back my position and will let this one run for a while or get stopped out if it hits my original cost basis. This one trade that took place over the last three trading days will double my overall profit for the year even if I get stopped out, and for every dollar Gold goes up between now and February (when this contract settles), I’ll make $400.
The lessons learned? Continue to follow my trading rules, even when dumb blind luck somehow got me out of losing $15,000 while I slept.
The following song by the Stones expresses my opinion when I woke up Friday morning: