Can you believe it? We are hours away from 2014. Where did the year go?
Now’s the time of the year when the gurus come out of the woodwork. They are all busy pontificating their predictions for 2014. Me? Well, regardless of what anyone claims, you cannot predict the long-term when it comes to the markets.
If these gurus KNEW that the market would end the year higher then they should sell all of earthly possessions and put the money into the market. Conversely, if they KNEW the market would end lower then they should short with both fists.
The problem is, ALL predictions are about the future and a lot of stuff can happen between now and then.
When it comes to markets, only the short-term can be predicted with any degree of accuracy. And, even that is a probability.
Unfortunately, the real money is in longer-term trends. A market can only move so much over a short period of time. This is why I take a hybrid approach. Predict the short-term and if that works out, stick around for as long as it does. We have some positions that have been on for months. Hopefully, they’ll continue to trend and we’ll be in them from years from now.
With this type of trend following, the long-term prediction pressure is off. If the market is in a solid trend and pulls back, there’s a good chance that it might attempt to resume its longer-term trend. If the new trend pans out, you stick with it. If not, you shrug your shoulders and scream NEXT! Admittedly, I occasionally drop an F-bomb before I scream next but you get the idea. If it doesn’t work, get over it quickly! and focus that energy on finding the next opportunities.
So, what are my predictions for 2014? I think that the markets will go up, down, and sideways.
So here are my New Year’s Resolutions:
1. I’m going to attempt to follow the markets the best I can during the up part and the down part.
2. I’m going to try to stay out as much as possible during the sideways part.
3. I’m going to use money and position management: wait for entries, take partial profits as offered, trail stops higher/lower, and honor my stops to help me with #1 and #2.
4. I know that my best defense is a good offense so I am going to pick the best and leave the rest. If the trade isn’t there, I’m not going to force it—To quote my buddy Peter Mauthe: “Don’t invent trades.”
“Follow” is key in the above. Again, this takes the pressure off. Other than the short-term, we do not have to predict. We just have to follow.
Okay Big Dave, you’re all philosophical. What about right now?
Well, right now, the Ps and Rusty are just off of all-time highs. The Quack is just off of multi-year highs.
A few caveats aside, most sectors look fantastic.
In spite of a flat market on Monday, many sectors banged out new highs–Banks, Chemicals, Computer Hardware, Durables, Drugs, Semis, and Leisure to name a few.
Even some areas at lower levels like Uranium are waking up.
So far, so good: The market remains constructive. I’m not going to fight it.
So what do we do? I am starting to see a few long side setups but not a tremendous amount just yet. We will likely see more and more as long as the market can hang in there. In the meantime, focus mostly on existing positions. Take partial profits as offered and trail your stops higher. Don’t fight the trend—avoid the short side for now.
Best of luck with your trading today!
HAPPY NEW YEAR!!!!!!
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