I thought that chances were we would rally into next week and possibly into expiration, followed by a move lower into the Fall. I could not have been more wrong as the market has tanked. However, I hedged myself and lightened up positions right around the highs of the market. The reason being that I rarely try to catch the last bit of a move, whether it be on the upside or downside.
The rally was already five weeks old and while many intermediate term rallies tend to stumble at the six week mark, the market no longer had the cushion it had at the beginning of July. Sentiment, while not extreme had improved a lot and the market was somewhat overbought. I especially did not want to reach on the long side in what I perceived to be a weak economic environment.
Had the rally lasted to expiration I would have taken a stab on the short side as I expected the economic data to take a turn for the worse. Am I upset that I missed the move lower? When I started trading I might have been but trading is a lot like deal making. If you are not willing to walk away from a deal than you will not be a good deal maker. In the same way one must be willing to wait for the ducks to line up and be willing to miss moves.