March 2009 Vs. April 2013: A Lesson in Discipline

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Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter .


I remember it like it was yesterday. The stock market had crashed and the very existence of capitalism was under siege.

After a sullen stretch of Shock & Awe, I forced myself to not only see the other side of the trade, but heading into that fateful weekend, position for it in kind.

The following Monday, March 9, 2009, I stayed true to my belief that the stock market was in the "panic" portion of our time-tested Three Phases of Leave , which would also serve as the "denial" phase for the bears after they cleaned up on the downside.

On March 10, 2009, I maintained my long bias -- we spoke of risk down to S&P (INDEXSP:.INX) 593 -- and penned several columns sharing my thought processes, here , here , and here . The tape responded with a sharp rally higher; I stayed the course.

On March 11, 2009, we dove deeper, discussing the classic signs of a bottom and the potential for a 20% move higher even at times if We Were Running to Stand Still.

On March 12, 2009, we continued to fight the bullish plight, here and here , and on March 13 -- following one of the greatest games in the history of sport -- I "lugged alotta exposure" into the weekend once more.

That Monday, it was business as usual; as societal acrimony spread throughout the world , we spied Bank Shares Ripping and prepared to take a ride higher on the Matador Express. At the time, Citigroup ( C ) galloped 35% ($0.63), Bank of America ( BAC ) ran 13% ($0.77), AIG ( AIG ) jumped 66% ($0.33) and both Wells Fargo ( WFC ) and JPMorgan ( JPM ) jumped 5% (about a buck each).

The bacon was shaken and the tape was about to blast off...

The next morning, Tuesday, I awoke to a telephone call from a colleague down south -- a stunning, terrible call that at first I thought was a dream. I shared what I could with our community, withholding particulars as a function of respect. Later that evening, with tears in my eyes, I wrote A Tribute to Bennet Sedacca .

Why the walk down memory lane? For one, to remember a special man who left a long-lasting legacy, one that continues to live on through his kinship and friendships. Second, I recall that historic stretch as I was very bullish -- not all in, but trading aggressively from the long-side -- when "life" interrupted, I flattened my pad, flew to Orlando, and focused on the important stuff.

In hindsight, it took me some time to recover my trading feel -- the S&P rallied some 15% while I was away from my turret -- but I didn't, nor do I now, regret it for a moment. As soon as I booked my flight down south to be with the Sedacca clan, I flattened my pad to the penny, reminding myself that "blind risk is bad risk" and "if you're not there to manage your risk, you're at a natural disadvantage."

Fast-forward to modern day. Last week, we painted the current financial picture -- it is The Moment of Truth as Stocks Toe the Maginot Line . This, of course, was shared in the context of some less-than-stellar risk management by yours truly , so in that regard, March 2009 and April 2013 are different. Back then we had seemingly turned the upside cusp and I was making cake when I flattened my pad; currently, we're at an important technical toggle and I gave back a chuck of performance last week.

Be that as it may, and as I've repeated many times over the course of my career, discipline must always trump conviction . As I am scheduled for a total hip replacement tomorrow -- one where I don't foresee an ability to "trade through" as I did last May -- I will be paring my September SPY puts as we approach the aforementioned moment of truth (+/-S&P1600).

If the bulls push through, it's a bullish "cup-and-handle" formation; if they fail, it's the dreaded double top (bearish). See both sides as we continue to find our way, one "step" at a time.

As always, I hope this finds you well.

R.P.

Twitter: @todd_harrison



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Stocks

Referenced Stocks: AIG , BAC , C , JPM , WFC

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