Wow! Obviously the big question for next week is whether or not the S&P downgrade is fully priced in or if we had some front-running this past week of a possible downgrade. One would think that with Friday’s swing off the lows that the downgrade isn’t priced in as we all know many were privy to the downgrade at some point during the day. I”ll be working on assessing plans for my portfolio with moves higher and lower and will act accordingly come Monday morning.

We all know that pullbacks are healthy for trends, but this past week was monumental. This carnage has been a long time coming and now that the week is over it doesn’t seem that long ago when we were battling a similar market back in ’08. To think that two weeks ago the $SPX was looking to blast through 1350 seems impossible now as that level sits 150 points away from Friday’s close. If there’s a silver lining from this past week I’d have to say that fear is back in the market.Why? The market kept turning its head to bad economic data here and abroad and finally that 800 lbs gorilla is out in the open.

What’s amazing is that complacency of many did nothing but contribute to the selling. Sure, the bots were out in full force, but many non-bot traders were no doubt forced to liquidate positions, close accounts, and lost months of profits in the span of a few days. Market action like this week is always difficult as a premium trader as spread that were sold for $3 are now selling for $8 or more. The $VIX hitting levels not seen in many months and now the downgrade coming out when the markets are closed with lots of time for posturing before the futures open Sunday night. We also have the FOMC on Tuesday and no question that this statement and the decision that accompanies it will be unlike the last few that traded without much volatility.

I took Friday off as I’m fully invested in the August cycle and quite honestly I didn’t want to watch the carnage. As a premium seller its important to preserve psychological capital so that informed decisions can be made when needed. By Fridays close my portfolio changed .03% for the day so I guess I didn’t miss much of anything other than a roller-coaster of emotions. Instead I spent the day working on a “Honey-Do” list and beating my kids in ping-pong. Enjoy your weekend and the links because Monday is not that far off!

  • More illness, doctor visits reported in years after Sept. 11th attacks [UC Irvine]
  • Don’t Let Trading Be Everything [The Stock Bandit]
  • Feeling Anxious? 5 Scientifically Proven Relaxation Techniques [PsyBlog]
  • Don’t let fear disrupt your investing [Fidelity]
  • The Dark Side of Oxytocin [APS]
  • Sticking to a trading routine [The Kirk Report]
  • How your brain talks to your gut, and vice versa [Nature]
  • Tilt and risk management [Dr. Phil]
  • Can new neurons buffer the brain against stress and depression? [Discover]