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Random ThoughtsYou didn’t become successful by changing careers frequently. You weren’t a surgeon, then an automatic transmission mechanic, and then a lawyer shortly thereafter. No. You stayed with your career until you became successful. Sure, like many of us, you may have changed careers at some point in your life but not every 6-months.
Yet in the markets, that’s exactly what people do. They become members of the church of what’s happening now. And right now, the market is choppy and sideways so they are gravitating towards mean reversion type systems or option selling. From years of experience-some of which I really don’t care to admit–I can tell you quite frankly, that’ll work until it don’t. Months and months and even years of small gains can be annihilated and then some by an outlier event—the so called “black swan” (Taleb) It’s then tough to pick up the pieces financially and psychologically and start all over again.
Not Your Way Or Highway?
Wait Big Dave, I thought you preach that it’s not your way or the highway. Well, technically, the only way to make money trading is to catch a trend. So, why not be a trend follower all the time? I’m just not a fan of contra-trend methods especially since you’re setting yourself up for limited gains and unlimited losses. Just ask yourself, what could go wrong because if it can go wrong, sooner or later in the markets it will. That’s one of the few things that I can guarantee in this business.
Like Perry Como, We Get Letters…Lots Of Letters
I get a lot of emails from people telling me how great their new system is. And lately, btw, I seem to be getting an inordinate amount. When I point out the unlimited risk aspect and that the amazing accuracy might be an aberration of current conditions, they tend to steer the conversation back to once again, how great the system is. Rather than let myself get dragged into a heated debate—something my wife Marcy has now forbidden me to do at cocktail parties—I just say this: Look, email me in 2-years to let me know how you’re doing. In 20-something years, only one person has ever gotten back with me. He made it 13-years before everything failed miserably.
Whatever Works For You
Do what makes sense to you. Just make darn sure that you have the potential for limited losses and unlimited gains and not vice versa. Don’t become a member of the church of what’s happening now or you’ll end up perpetually out of phase. And, since the only way to make money trading is to catch a trend, do consider joining the church of trend following (www.thechurchoftrendfollowing.com –I can save you the click, it’ll bring you back here).
“If You Choose Not To Decide, You Still Have Made A Choice”
(Rush, not the fat angry white man but the band on their 401k tour)
But wait Big Dave, if you’re trend following, what do you do when there isn’t a trend? That’s easy. Nothing. See last week’s Dave Landry’s the week in charts for a LOT more on this. And, if you’re not busy saving lives, building buildings, repairing automatic transmissions, or doing other great things, then stop by the show tomorrow (08/20/15). Bring your questions, comments, and favorite stock picks.
And Now For Something Completely Different
Before we get to the markets, I wanted to thank Jeffrey Saut over at Ramond James for the “shout out” in his column
Jeffrey Saut, Chief Investment Strategist at Raymond James; Source: Raymondjames.com
“….But coming from me – someone who is my own biggest critic as well as a critic of Wall Street – you best realize that Mr. Landry is in the top 1% of people on Wall Street. He is clear, he is concise, and he is right more than he is wrong. AND more importantly, when he is wrong he doesn’t just sit there and fight the tape. He adjusts unlike [many] of the bonehead strategists on Wall Street; stop reading and listening to him at your own risk.”
He was actually quoting Gary Kaltbaum from a column that Gary wrote over 12-years ago. Better late than never I suppose. Seriously, thanks Jeffrey!!! You can read the whole column here. And, thanks again Gary! Keep up the good fight! Godspeed.
Gary Kaultbaum, Source: garyk.com
To The Markets
I’m glad that I backed off a bit on my columns. In choppy conditions this has helped me to see the forest for the trees and not get too caught up in the day-to-day action. On good days, it seems like this market wants to break out but on bad days, just the opposite. However, if you wait a few days it pretty becomes same as it ever was—unchanged. For quite some time, it sure seems that if you don’t like the weather, just wait 5 minutes. Stop trying to figure it out. Wait, don’t anticipate.
The Ps (S&P 500) are around 2100, which is pretty much were they were last December.
The Quack (Nasdaq) is a smidge higher than were it was back in February.
So, those two are sideways at best.
The Rusty (IWM) is still not looking very pretty. So far, a top remains in place here (see the aforementioned chart show). The good news is that it has a lot of support just below where it is trading. You can’t hang your hat on that though.
The sector action is a mixed bag. Most are sideways like the overall market. A few such as Retail and Materials & Construction are at or near new highs. Some, like the Semis appear to remain in trouble longer-term. Commodities such as Metals & Mining and the Energies appeared to be scraping bottom but now it looks like they are going to test their lows once again.
Like the recently mentioned blind men with an elephant allegory, it all depends on where you look. For the most part though, I’m not seeing a lot to get excited about one way or the other.
So What Do We Do?
Be super selective. Unless you think you have the mother of all setups, then pass. Sometimes you just have to sit on your hands. As I preach, I wish someone would have bothered to tell me that 20-something years ago. Luckily, for you, you have reverend Dave. You’re welcome. For now, just wait and don’t anticipate. And, above all, stay out of the church of what’s happening now.
Best of luck with your trading today!
Dave
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