Today offers a clean slate. Of course, you're balance and the results of your trades from 2020 didn't magically change, but despite my ramblings about how 2021 is essentially a change of the calendar and not much more, there is a positive. The emotional and mental wiping of the slate could prove a huge benefit to some.
This was one of the driving reasons I wanted to come into the new year with a ledger clear of trades. Admittedly, I do have a few open positions, option combination trades set to expire next Friday. None are overwhelming in size and most have an intrinsic value well above their market value, so I felt a little silly closing them completely this close to expiration. Of course, with the market retracing some recent gains and momentum stocks losing plenty of luster, those intrinsic levels are all but evaporated.
This may be a good start to the year. I'd call it a bit of a reality check. For the markets to continue to press forward, they require a step back from time to time. We don't want to see insane valuations simply because of momentum. That doesn't carry a market long term. It creates short-term trading opportunities but can create some back habits. I talked of that last year.
Trimming and trailing is still the way to play this market. While you won't catch the top with your selling, on days like today, you have powder to reload. Additionally, you aren't kicking yourself as hard for not selling higher. I took a ton of grief on Twitter for suggesting this very idea. I do get it. If you own something, you never want to see anyone say anything that could be perceived as negative, but you need people testing your views. You need people on the other side of the trade or, at the very least, presenting you with some challenges to your rationale. If you're immediate response to someone taking an opposing argument is anger and emotion rather than a logical rebuttal, then you really do need to look closely at your position. Hopefully, a few days off allowed for the mental reset so you can respond with a thought-out rebuttal rather than fury or pride.
So, while we're red, this isn't necessarily a poor start to the year. We need the market to emotionally reset like traders should have done over the holidays. We need a little froth to come out of valuation. I've been trying to sound the warning on names like QuantumScape (QS) and FuboTV (FUBO) for the last few weeks. Sadly, we need chasers to feel a bit of pain in order to create better setups.
Today might not feel like a positive but I believe it is.
