Did we offically have a correction?

[Major Tom]

In a weird way, I'm a little disappointed that it wasn't deeper and didn't last longer, although I know I'll get my wish at some point! I seem to have an ability to focus in on the things that interest me, to the exclusion of everything else. When the market is going up, I tend to check my balances quite often. When it's going down, I don't bother looking at my account unless I have to, in order to make a transfer or trade, occurrences which are fairly infrequent. I don't even know how low my balances went during the recent dip, because I was busy assembling a ham radio kit for a friend who is sick, and documenting the whole process for him.

I have another friend who also has an ability to ignore things, but not in a good way. She tends not to plan ahead, and also suffers from anxiety. When there are impending crises in her life, she buries her head in the sand, and doesn't prepare. Inevitably, when the crisis hits, things get bad. I'm a little different. I spend a lot of time planning for potential crises, and figuring out what my plan of action will be. I decided a long time ago that once I had picked my AA, I was going to stick with it through thick and thin. This gives me permission to bury my head deeply in the sand whenever the market dips, for however long it takes. I'm good at ignoring people and things that I find tedious and irrelevant and, in the big scheme of things, these little blips along the way are just that.

Anyway, I'm in the middle of writing a monster blog entry about a new product I'm reviewing, and need to get back to that. I was lucky enough to have a pre-production unit for review, and now have serial #2 of the final production version. First though, a cup of coffee - my first of the day. This is the important stuff!

Market blips? They're not really that interesting are they? Sorry if that sounds a bit arrogant, but I don't like it when my balances go down, so I just tune it out and focus my attention elsewhere.

 

[NW-Bound]

To me it's 2 thirds over.

To NW we have 4 more coming and you just lost half your dough.

How do you think it is?

Are you trying to scare me?

Lemme see. I usually run 70% stock AA. So, for my stash to be halved, the stock has to drop to 20% of the current stash. That means stock values drop to 20/70 or 29c on the dollar.

That would be pretty bad. And if it happens, it is most likely I will be buying stocks along the way losing my cash, and will end up with less than 1/2 of what I have now.

 

[audreyh1]

I was hoping for a re-test.

Might still be one.

 

[copyright1997reloaded]

Until we break out to new highs, it isn't over.

There are psychological factors to why previously higher prices provide resistance. There are investors out there that bought at the high (or have positions purchased at the high). Some of them did not sell because to sell is to admit a mistake - but they would like to sell if "only I can get out without a loss".

There are also folks who bought during the dip but will flip the positions out as the rally towards the old high. I am in this category on some things I've bought during the downturn, some of which I've already sold for gains and some of which I am still holding - but will likely sell soon.

On the other side where those who buy the dip/downturn, and see any lower price as an opportunity to get in. Some of those will be strong holders of a stock. Some of those would be out the door had prices kept going down.

I continue to believe as I did before (after the swoosh down) that we will see new highs in this market this year, that it seems/feels closer to mid-late 1998 than March of 2000. Having said that, I continue to trim positions having made the decision that my mid-January near 70% equity allocation was a bit rich. (Now under 66.5%)

 

[Major Tom]

I continue to believe as I did before (after the swoosh down) that we will see new highs in this market this year, that it seems/feels closer to mid-late 1998 than March of 2000.

My goodness, please let that be so. I could pass a very significant (for me) milestone in a year or two if this bull market has plenty of legs left on it.

 

[NW-Bound]

Until we break out to new highs, it isn't over.

There are psychological factors to why previously higher prices provide resistance. There are investors out there that bought at the high (or have positions purchased at the high). Some of them did not sell because to sell is to admit a mistake - but they would like to sell if "only I can get out without a loss".

There are also folks who bought during the dip but will flip the positions out as the rally towards the old high. I am in this category on some things I've bought during the downturn, some of which I've already sold for gains and some of which I am still holding - but will likely sell soon.

During the recent rout, I bought back some shares that I "lost" in mid-Jan due to call options getting exercised. As the stocks recovered, I have been selling options again on them. The tech stocks bounced up so much more than the overall market (check out the Nasdaq against the S&P), and at this point all the options I sold on these shares are in-the-money.

If the market holds up by next Friday, the option expiry date, I will be forced to sell, and my stock AA will drop back to the 60%. I will have free cash to play a repeat if the market drops again.

I continue to believe as I did before (after the swoosh down) that we will see new highs in this market this year, that it seems/feels closer to mid-late 1998 than March of 2000. Having said that, I continue to trim positions having made the decision that my mid-January near 70% equity allocation was a bit rich. (Now under 66.5%)

+1

Being the stock lover that I am, I need to remind myself to keep my stock AA to 50-60%, and not 70-80% as in past years.