Anthony Robbins once told the story of a preacher who preached the same sermon week after week. Paraphrasing: One of the churchgoers approached the good reverend and said “I couldn’t help but notice that you have been preaching the same sermon over and over.” The good reverend replied, “That’s correct and I’m going to keep preaching that sermon until all of you people get it.”
My sermon, or more like a mantra, has been to take things one day at a time. This is especially true in a range bound market. You can’t confuse the issue with why the market should be going down. I get my news though osmosis—and lately that has been through my guest host slot on TimingResearch.com’s panel. Evidently, our Fed, the ECB (whatever that is), oil, Yellen (not sure what that is or why they’re raising their voice), and of course the situation in Nigeria are all very concerning.
The point is that there are plenty of logical reasons why this market should be going down. Yet, it continues to go mostly sideways. Now, you can’t trade a trend that doesn’t exists but you certainly can stay out of the way until one materializes. Write that down on a sticky note and stick it to your quote screen. You’re welcome! As I preach, at the top of the range things will look rosy and at the bottom of the range things will look ominous. You have to wait and not anticipate.
It appeared that market was beginning to come unglued but then on Thursday it promptly reversed, finding support near the bottom of its range. Now, let’s not start kissing each other just yet. Wait to see where the bounce will take us first.
Let’s look at the scoreboard.
The Ps (S&P 500) and Quack (Nasdaq) both probed towards the bottom of their trading ranges but then reversed to close up around 1%.
The Rusty (IWM) also probed lower but managed to turn around to finish over 1 1/3% higher.
Gold and Silver stocks were hit fairly had but so far, a bottom still appears to remain in place here. If you missed the recent thrust, now might be a good second chance to get on board. Just make sure you wait for an entry, especially in light of this weakness in the stocks and underlying commodities.
Some of the bigger cap areas that have been losing steam woke up on Thursday. Durables, for instance, broke out with vigor to new highs.
Energies probed lower before ending flat. They still appear to be bottoming. Notice that I used the gerund. So far, it appears that it’s going to be a process and not an event.
Banks found support at their recent lows. They still look dubious at best longer-term but it is good to see them stabilize. I remain concerned about a potential rout lower here—one day at a time I suppose (where have I heard that before?).
Health Care Plans appear to be stabilizing in their pullback. They look poised to make a new leg higher. You might not like what’s going on here but the market sure does.
Without going into more details, the bottom line is that Thursday was a good day. Let’s see if the market can follow through one way or the other before getting too excited.
So what do we do? In keeping with the “same sermon” theme of this column, I think today’s plan of action remains yet another cut and paste:
Again, don’t worry about figuring it all out today. Do honor your stops on existing positions just in case. He who fights and runs away lives to fight another day. I think it has been 24 hours since I last said that. DO be selective. I think you really have to pick your spots carefully. I have a gold and a speculative IPO on radar and that’s it. Both of these have the potential to trade contra to the overall market. For the most part, let ‘em fight it out. I read recently that trading was 50% patience. I agree except that I think that number is more like 75%. The other half is mental, money management, and good stock selection (please Google Yogi Berra before you question my math).
Best of luck with your trading today!