Two weeks ago, I gave 628 new DOWN signals and only 21 new UPs. That was the most extreme negative or positive move I have done in the past 5 years of HEDGEfolios by about a factor of 2. It was a very tough one because 449 of the new DOWNs were signals that I was wrong about. Typically, 68% of signals at HEDGEfolios are closed out as winners so it wasn’t so easy to have a week where I changed course with 71% being wrong.

Many investors have big difficulties admitting when they are wrong. I do too. What makes it easier for me is being objective about the prospects for being less wrong going forward. Capitulations occur out of desperation. Exiting a position at a loss is not the same as capitulation if you are focusing on what will happen to the stock next, not what happened to the stock in the past to cause the desperation.

On the night I made these decisions, I hinted at what I had seen when I wrote about When Bottoms Drop Out and I voted Bearish at the Ticker Sense poll. I think this was the only time I ever changed my vote on the poll before publishing the signals and timing indicator at HEDGEfolios.  I thought it was extreme enough to violate my policy and earlier that night, I was a bit more ominous when I wrote this:

During the 5 or so years I have been doing HEDGEfolios, there have been three times I have thought the market was at risk for an imminent and serious decline. August 16th, 2007…January 21, 2008…and today. The previous two times, the Fed showed up with surprise cuts the next day.

The dramatic reversal I saw in the charts a few weeks ago had to do with my belief that many stocks trading near their individual support levels had made decisive moves lower. I call that a bottom dropping out. That eventually played out in the days that followed as we hit new lows. I was off by a week, but Bernanke did eventually show up with a new bailout tool.

This week, I gave more new DOWNs (158) vs. new UPs (103).  Then the TSLF spiked us higher and yet, nothing about Tuesday’s big rally has changed my mind.