Weekend Portfolio Analysis (August 29, 2015)

Market Conditions

I spent this past week vacationing with my family at Hilton Head Island in South Carolina. While I enjoyed the brief respite from reality, the markets decided to create their own sort of alternate reality. We started the week on Monday with the markets crashing. At one point during trading on Monday, the Dow was down over 1,000 points. By Wednesday, the markets began to rally and by the end of the week it was as if nothing ever happened. The SPX opened Monday at 1965.15 and closed Friday at 1988.87, up 23.72 or 1.21%.

Chart_082915_SPX

The 2040-2135 trading range that the SPX has been in for most of the year is now a distant memory. The support area at 1980-2000 was violated, but likely offer resistance on the way back up. Monday’s lows of 1870 show a great deal of support, however if that is violated, the low set last October around 1820 would be the next support area to watch.

Trade Activity This Week

All of the trades made this week were done early Monday morning, one of the few times that I actually had an opportunity to look at my account. I did not know how bad things were going to get, so I chose to just close everything out rather than worry about it while on our vacation. In hindsight, that was probably not the wisest decision as it did result in me taking the largest losses that I have had this year. My positions were all well outside the move of this week’s correction, however in the heat of the moment, one never knows how bad things might get. I detailed all of the trades in the post, Crash on Black Monday.

Plan For Next Week

I am not convinced that this week’s activity is the end of the correction. I am more inclined to believe that this is a prelude to something bigger. As such, I will be treading very carefully for the next few weeks. With volatility still remaining elevated, it does present an opportunity to open some new positions, but I will be looking to place short strikes farther than usual out-of-the-money.

The portfolio is now up only by 16.17% for the year, but that still is significantly better than the S&P 500 which is now down by 3.40% (see Trading Results).  The portfolio is currently about 90% in cash.

Have a great weekend!

  • Jonathan

    You did the right thing. No one knew what was going to happen last week. The market could have continued to move lower. Small losses are what will keep you in this business for a long time. Trading is one of the most difficult professions but also easy when you maintain discipline. People blow up their accounts because they lose their discipline.

    • Aram Basmadjian

      Thanks for the vote of confidence, Jonathan. Hind sight is always 20/20 in this business and can really get you down if you focus on it too much. “If only I had {insert winning trade here}.” I have received many emails from readers who blew up their accounts this week either because they were trading too large and received margin calls at the worst possible time. Another benefit of keeping our positions small (particularly when making undefined-risk trades) is the ability to choose when to close a losing position (as opposed to having it closed for you by the brokerage at the most inopportune time and price). Their were lots of lessons taught to traders this week by the markets. I am thankful that I was able to learn a few things in the process without having my account devastated.