Your Success Will Begin On This Day

Random Thoughts

I avoid all news but I do get some though osmosis. Yesterday, for instance,  during a Benzinga interview (click here to listen on YouTube),  I learned that there was a Fed meeting.
Big Dave, how can a trader ignore the Fed? Unless you’re watching every zig and zag and in and out 20 times a day, things like the Fed are irrelevant. My good friend Greg Morris in his speeches often pulls up a chart without a timeline. He quizzes the audience to identify the wars, multiple earning periods, numerous Fed meetings, and 09/11 & many other news events in the chart. It’s impossible to pick out where these occurred. In the end, it’s just noise. My goal is hold positons as long as possible—weeks, months, and hopefully years. And during those weeks/months/years there will be Fed meetings, earnings, news, and devastating events such as the Nick and Mariah breakup.

I suppose the financial news wouldn’t have much to say if all they said was “Today, stocks went up because there was buying pressure” or “Today, stocks went down because there was selling pressure.”

It takes a while to strip off all the fluff. The day you stop chasing the rainbows, applying logic, and trying to figure everything out is the day that your success will begin. Realize that no one knows exactly what a market will do. Learn to just follow long. Write that down.

Let’s look at the market.

The Ps (S&P 500) probed up towards all-time highs but they settled back to end only a smidge higher. The stalling action is a little disappointing but the fact that they ended higher and are just shy of new highs is better than a poke-in-the-eye.

The Quack (Nasdaq) was a little better. It too ended off its best levels but was able to close up nearly ¼% nonetheless. This action has it within 1% of 14-year highs.

The Rusty (IWM) continues to lag longer-term. It has been wide-and-loose at best all year.

In general, the sector action was okay. Some areas like Drugs made it back to new highs.

Ideally, I’d like to see areas like the Semis, which have stalled at/shy of their July peak, break out to new highs.

Energies turned back down. They are now set up as a First Thrust down. Keep an eye out for shorting opportunities here.

Bonds are still a concern. Yet again, they continue to slide. As I’ve been preaching, it’s not the absolute interest rates that’s important at this juncture–zero, or zero point zero zero zero…. It’s the delta (change) in rates that’s important. If everyone runs for door at the same time for fear of higher rates then things could get ugly fast. I know this because I spent over a decade as a chief technical analyst for a bond fund.

Yet again, rising rates, plagues, and wars but Gold continues to implode in a “What? Me Worry” fashion. It is now approaching multi-year lows. Is it time to bottom fish? NO, have you not read anything that I’ve written? I’m going to cover Gold in detail later today in the chart show.

So what do we do? There’s always something to worry about. As long as the Ps and Quack remain near new highs then give the market the benefit of the doubt. Err on the buy side. Do pay attention to areas like Energy and Real Estate that are breaking down and do take short side setups there if you really like them. For the most part though, again, err on the side of the market. Be selective though. Make sure you really really like a setup and make sure you wait for an entry. It never ceases to amaze me how many disastrous trades can be avoided by applying this simple technique.

Best of luck with your trading today!

Dave