You can chase a market or you can let it come to you. Chasing it is fun and exciting. And, occasionally, you might just catch it. Unfortunately, longer-term, you’ll find that you are often going to be out of phase. Letting the market come to you requires a ton of patience, and sometimes you have to let some moves just pass you by. It can be boring. In fact, trading, done properly, can be quite boring. We’re not in this business for excitement. As I’ve said before, if you are looking for excitement, then have an affair. That way, you only loose half of your money.
Let’s look at the scoreboard.
The Ps (S&P 500) ended flat-again. The recent drifting or “wedging” higher/loss of momentum suggests that buying has slowly exhausted itself, at least temporarily.
The Quack (Nasdaq) has also lost momentum as of late but has been slightly stronger than the Ps by slowing working its way higher. Thursday’s action appeared to be a bit of capitulation. The market tried to go higher but ended right around where it started. This is another clue that it too might be running out of steam.
Now, just because the market remains overbought and is losing momentum doesn’t mean that you should rush out and short it. Never short an index that is at or just shy of new highs. Wait for signal. Write that down. My point is that you should be cautious and not blindly buy into such markets.
The sector action was mixed on Thursday. Some, like Banks, were soft but others like Retail, Hardware, and, Software, to name a few, banged out new highs.
Overall, the market remains healthy it’s just that the indices have lost some steam and remain overbought. Stop me if you’ve heard that before.
I’ve spent a lot of time pontificating about the overall market lately but the bottom line is that predicting the overall market, at least in an environment like this, is more difficult that predicting individual issues.
Again, by predicting individual issues, I don’t mean all issues, all of the time. What I mean is sifting through a couple hundred IPOs and a couple thousand more established issues looking for opportunities. I look to find the stock(s) that work for me vs. trying to play every market zig and zag.
So what have you found Big Dave? I’m seeing selected Rare Earth stocks wake up and a few IPOs that look promising. These stocks are so high in beta that they have the potential to move regardless of what the market is doing.
So what do we do? As long as the market remains at or near new highs there will not be many setups with my methodology. Therefore, I mostly wait. Remember, I’m a pullback player. The good news is that there are a few of the aforementioned more speculative issues that are beginning to set up. I’m going to look to nibble here but only on entries-no trigger, no trade. I know I preach that a lot but it sure has kept us out of new trouble as of late. Following simple techniques like this and not trying to outsmart the markets wins in the end. It can be boring but it’s better than the excitement that comes with losing money.
Best of luck with your trading today!
P. S. I’m going to be on tour next week. On Monday, I’m once again the guest host for TimingResearch.com’s weekly webinar. We have a very interesting panel this week. I’m can’t wait. Click here for more info. On Tuesday, I will be part InvestorInpiration.com’s webinar with 8 other market experts. The lineup here is very impressive. Click here to more info. Both shows are free and if you’re not careful, you might just learn something.
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