Market Due A Pullback

The market is due a pullback. The odds are in my favor. I know that. x number of up days in a row. x number of days without a 5% pullback. But just because I know the odds are in my favor, doesn't make it any easier to sit on losing positions and watch them drain away.

The market is up 16% YTD. 21% in the last six months. The move has been relentless. 7% in just the last month. There has been little to no respite. A couple of minor pullbacks here and there. Other than that, it has been a tidal surge.

The move is flushing the bears and the laggards out. I feel it. I can feel the sentiment changing. I feel better about the future. I see things differently from what I saw them before. I can see the justifications for valuation levels, expanding multiples and all sundry of related thoughts that go hand in hand with this kind of move. Don't fight the Fed (or is it ABE and don't fight the trends/momentum). I have some short positions on that are getting pretty painful. I shorted for the wrong reason (valuation) and they are names leading the charge. I have gone against this thing for the last couple of months - selling into it, putting on shorts and directionally speccing on market puts. I know that you need to manage your risks. I know there are times to cut and run, take the loss, live to fight another day.

But I have been here before. I felt those same feelings, and I have not held to my conviction or had the patience to hang tough. I have spat the dummy and watched as I missed out on the rewards that were there waiting for me. Not this time. I am going to go with my conviction. I am going to have the fortitude to go against the flow. But I am also going to put in some stops that will minimize the damage should it continue to go against me.