Beware of Portfolio Decisions Based on Any One Day's Actions

Yesterday in the car I caught a Dennis Gartman segment on Fast Money. Mr. Gartman expressed some concern for parts of the commodity complex that he has favored and also posited that now might be time to take on more equity exposure. He specifically talked about having sold commodity ETFs on Monday. He mentioned JP Morgan (JPM) but I am not sure if he bought the name.

It seemed like he had made some meaningful changes to his portfolio based on the action on Monday.

Assuming I have that right, it raises an important investor know thyself point.

Making serious changes to a portfolio based on the action occurring on any given day (or two) is probably the wrong strategy for most people (me included). Just so no one gets the wrong idea, I am not taking a shot at Gartman. I am just pointing out that if you were not one for big changes based on what could be a change in momentum for market segments before, you probably should not be one for those changes now.

If you listen to Gartman, he clearly knows what he is doing with regard to momentum, making changes, spotting trends and so forth. Other people have equal success buying on weakness and selling on strength.

Changing your stripes on a whim based on a segment on TV or from one article you read is likely a very bad idea. It is an especially bad idea when the market is having a crisis of some sort like now.

If you are familiar with Gartman, you know that the changes he made Monday (again assuming I heard correctly) could be reversed at any time based on his interpretation of the market. Making big portfolio changes on a regular basis will work for some folks but not for others. Where does your approach fall in this discussion?

The desire to react to a compelling argument made by someone, who sounds like they know their stuff, is very human--we've all done it once or twice in our lifetime--and buying a stock in a moderate quantity in this context, that sounds like a winner, will not be the end of you by any means. However the pattern of reacting excitedly on a regular basis is potentially dangerous behavior.