After months of choppiness and generally ugly market conditions, finally some of the more reliable long term positions like DIS got stung out of the blue.
As I’ve been saying for many months now, these markets are far from ideal for the trend trader, but at least we have the tools to identify such conditions. Specifically we have the OVI itself, we have select chart setups, and we have the OVIsi. The past week just shows that nothing is immune to the market’s uncertainty, BUT with proper money management any negative impact should be relatively minor.
This is where Blackjack becomes relevant. When the ‘count’ is in your favour and the cards are good you load up. When the count and the cards are against you, you back off.
This is exactly the same for the markets.
Since April we’ve identified these markets as far from ideal, with some notable exceptions. Even some of those have been affected now.
The challenge is that we’re in an ugly, choppy market phase that is broadly neither one thing nor the other … Plus we’ve been in earnings season where even stalwards have been bitten. This makes it imperative to reduce size and be ultra selective. If one goes against you it shouldn’t be catastrophic.
Ideally we’ll have a big shakeout so our ideal setups can rebuild, but it’s by no means a sure thing just yet. It will happen though … we’ve been through these things many times, so just be patient, don’t load up, and continue to be very selective.