2014 A Year Of Lessons Re-Learned

Random Thoughts

Lately, I have been hosting TimingResearch.com’s weekly panel. Yesterday, we discussed lessons learned in 2014. As I update my flash drive table of contents for the Week In Charts recordings, I’m reminded not so much of new lessons but that markets never change. Don’t micro manage. Sometimes moves take time to develop. So what if a stock takes a few weeks or even months to move. Many so called “dead money” trades paid off very nicely in 2014. Annualized, these were substantial moves. This was a reoccurring theme throughout the year. Follow your plan to its end. Other lessons relearned included avoiding changing styles when the market isn’t fitting your methodology. Sometimes you just have to wait for the market to come to you. Discretion is important-provided that you are disciplined—use your brain. Don’t through caution to the wind but do stay with a stock if it only “nicks” your stop by a few cents and then promptly takes off. Always be on the lookout for the next big thing-IPOs were on fire in 2014. Many doubled in value but also came right back in. Therefore, as always, money and position management are key. Another lesson relearned is that making money is better than being right-not all stocks paid off but the few that did were very nice. A few triple digit returns can make all the difference in the world. So, outliers are key. Stocks are meant to be traded, not hoarded. This was especially true for the aforementioned IPOs. Trend following, although not perfect (nothing is, trust me, if I found something perfect you’d never see my fat ass again), works. You must follow your system, even though you know there will be times where you are flat out wrong. I can go on and on. There were a plethora of lessons to be re-learned in 2014.

Let’s look at the scoreboard.

The Ps (S&P) continued to drift higher to end in the plus column, albeit barely. Nevertheless, this action was enough to keep them at all-time highs.

The Quack (Nasdaq) ended in flatsville, gaining .05 points, not percent. It remains right at 14-year highs.

The Rusty (IWM) had a decent day, gaining .43%. This is enough to keep it at all-time highs.

I’m not a big fan of market drift, especially like we’re seeing in the Ps. Usually, this is a bearish sign. However, since it is circa holiday trading, I’m not going to read too much into it. Maybe it’s just end of year drift. Err on the side of the tape is my motto.

Gold stocks turned back down. Again, it looks like the bottom here will be more of a process than an event.

Energies and Metals & Mining (overall) remain in serious slides. Other than that, again most areas still look pretty good.

Like the overall market, most sectors remain positive, remaining at or near new highs. Conglomerates, Retail, Durables, Non-Durables, and Financials are good examples here.

Regional Banks are pushing into new highs with vigor.

Biotech continue to bounce back, gaining back another 1/2%. Although it lost a little steam in its recovery, its bounce back suggests that the recent side was only corrective in nature.

Utilities plowed into new highs yet again. Lately, they have been action more like technology momentum stocks than the sleepy sector they are. That’s fine with me. As recently mentioned, “trade anything that moves.”

So what do we do? Nothing has changed just yet. Since the methodology requires a pullback, I’m not seeing a lot of new buy side setups. Therefore, manage what you already have. On the short side, don’t fight the tape. Trade only those issues such as the Energies that can trade contra to the overall market.

This will likely be my last column for 2014. Thanks so much for all of you who have stuck with me throughout the year.

Happy New Year!

Best of luck with your trading today!

Dave