” It Was Never The Thinking That Made Big Money For Me “

Random Thoughts

I received an email of condolences because the market has been trading sideways. The sender knew that it’s tough for a trend follower like me when there is no trend to follower. I’m okay (well, that’s open for debate, but at least I’m okay relative to the markets). Luckily, some of our old friends in mature trends continued higher in spite of the market. And, the even better news is that new trends have emerged (read further) in areas that can trade independently to the indices. It doesn’t always work this well but it is a thing of beauty when it does.

Last night in the webinar, I was asked how to factor in overall conditions into your trading plan. First, you want to err on the side of the longer-term trend. Second, if the market is trading mostly sideways short-to-intermediate-term, you want to pick your spots carefully. You also might have to sit on your hands until conditions improve. Sometimes the best choice is no choice. Quoting Livermore: “It never was my thinking that made the big money for me. It always was my sitting. Got that?” Many have confused this quote with staying with positions—which is another lesson for another day. His point was that sometimes the best new action is no new action. Most cannot sit tight because they crave excitement.

The good news is that every now and then, you’ll get setups that can trade independently of the indices. You’re not always blessed with such opportunities but if you are willing to wait patiently then you’ll have the right frame of mind to see them when they occur. Lately, these opportunities have been in IPOs, Energies-including Crude itself (USO), Steel & Iron, Latin America, and second tier Chinese stocks. Knock on wood, so far, so good.

Let’s get to the markets.

The Ps (S&P 500)  sold off a bit but reversed to close off their worst levels. They still ended lower nonetheless. This action keeps them stuck in the mother-of-all sideways-trading ranges—pretty much were they were last Thanksgiving.

The Quack (Nasdaq) put in a similar performance. It also hasn’t made any forward progress in months.

The Rusty (IWM) sold off hard but did manage to erase most of its losses. So far though, a Bowtie sell signal remains in place here. Let’s hope for a few big up days to negate this-I know hope in one hand and poo in the other and see which one gets filled first.

There’s no need to bore you (too late?) and go through all the sectors. Many just look like the indices themselves—sideways.

Again, the good news is the aforementioned emerging trends remain intact. In fact, I guess we can start calling them just plain trends now.

So what do we do? Well, I think everything that I’ve hinted at so far: Since the indices are still range bound you want to continue to be super selective—if only there were a course on How To Pick The Best And Leave The Rest. You also might have to do some sitting. Got that?

Best of luck with your trading today!

Dave