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Last week markets performance – should we be worried?

SPY

 
Last week in Wall Street was somewhat stable and without any excessive hiccups. Yet it still was driven by fools. The recovery from the recent correction, if we can call it a correction, has been steady. As you can see in the chart above, we experienced a strong V shaped recovery.

A week ago, investors were selling stocks sharply and buying government bonds (as if they were supposed to save them) and this week they were selling bonds and buying stocks as they (probably) realized how foolish they were.

As Eric Jackson said in his interview for Breakout that what we just have experienced, was a great evidence of unreasonable irrationality of investors out there frantically selling one sort of assets and buying another sort of assets right after the storm and not prior to it. Dividend investors and value investors know this and they stay calm. They do not sell whenever a market shows a sign of weakness. On the contrary, many start buying.

It is a reason, why so many investors lose money at Wall Street rather than make them.

I must admit that in the past I acted the same way. Whenever a market coughed I started selling hoping to buy later at a lower price. Jesse Livermore, a legendary trader of the late 19th and early 20th century called such investors “suckers” and he happily deprived them from their money in bucket shops (small trading street brokers).

Other than that, markets were calmed down by Janet Yellen’s claim that she would continue in tapering of the QE. I think nobody believes it anymore; except talking heads. But will she really do it? Some commentators out there fail to acknowledge that she added a few conditions to tapering – positive data. Will we have positive data such as employment, GDP, etc.?

If you are a common citizen who live off his hard work, you know, how hard it is to make your living. If you are a politician, banker, an employee of a large brokerage as a trader, or a Hollywood star, you are probably out of touch of reality and do not understand, that we are far from recovery.

The markets are propped by QE and cheap money and not the real strong and sustainable economic data. And if QE ends, the rally dies with it. Should we be worried that something bigger is waiting just right behind the corner?

Once, I have heard that economic crisis come and go in cycles. We have circa 7 years of prosperity followed by 7 years of crisis, and so on. Where are we though? In which cycle?

The goal of every investor should be to make money, but also to protect them. Protect his gains and his principal. As a dividend investor my principal is not as important as my gains – dividends.

Make sure they are safe and you will prosper.

And what about my options? During falling markets, selling puts can be a bit of frustrating (worst case scenario, you will be assigned your long wanted dividend stocks). Lowering your strike price deeper out of the money can help you significantly in mitigating that frustration.

My accounts did very well last week and jumped up in value, check my charts on My Holdings page.

I have received nice dividends this week ($150.00 in all combined accounts) and next week we will be heading towards expiration Friday when two of my option contracts will expire worthless (unless a catastrophe happens). With that, I will be able to claim another $142.42 income from collected premium.

My all combined accounts are up by +7.41%

What about you? How do you protect your gains so you do not give them up when markets slump?
 
 





2 responses to “Last week markets performance – should we be worried?”

  1. Marvin says:

    I use a 25% trailing stop for most of my positions and a 15% trailing stop for some of my other positions. I have had a ton of people email me concerned about this market but I always tell them not to react with emotions.

    • Martin says:

      That’s the only good approach, stay calm and try to be buying. Do you use stop loss? I don’t. In the past it kicked me out many times with a loss. I just use trailing buy orders for the stocks on the way down.

      Thanks
      Martin

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