Bored With The Market? Avoid Drastic New Action

Random Thoughts

With trends, you’re much better off in an accelerating one then in one that’s decelerating. An accelerating trend means that there are new buyers coming into the market. A decelerating trend means that there are still buyers but there’s not as much pent up demand. One has to wonder if this lessening demand will eventually exhaust itself.

The Ps (S&P 500) went nearly vertical from their mid-October lows until early November, gaining over 11%. Since then they have continued higher but with far less vigor, taking on just under 2% in nearly a month.

What is, is. That’s what I’ve been preaching lately.  The market is going higher. Don’t question it too much but do pay attention. The loss of momentum is somewhat concerning but as long as it can stay at or near new highs, there’s no need to take any drastic new action. Do continue to honor your stops just in case and do take partial profits as offered.

Ideally, I’d like to see a new catalyst come into this market. Something that would cause shares to accelerate higher and then have orderly corrections—rinse and repeat. Right now we are stuck with a market that’s losing steam but continuing higher nonetheless. There’s no need to fight it.

Looking to the scoreboard, you really don’t want to read too much into a flat day but once again a soft market was met with buyers—not quite enough to it back into the plus column but it finished well its worst levels nonetheless.

I’m not sure that we can have eternal sunshine where we drift higher forever but again, I’m not going to fight it.

With a flat day, not a whole lot changes in the sectors. Most continue to do well. See recent columns for a partial list of trending areas.

There are a few notable exceptions. Metals & Mining have turned back down and are just shy of multi-year lows. This is why we do not bottom fish. I do think we will see the mother of all bottoms in Gold and Silver but we might just have to wait a while. There’s no hurry. Wait.

So what do we do? Even though the indices have lost steam, the trend for now remains up. Therefore, we continue to follow along like good little trend followers. Avoid the short side unless you think you have the mother-of-all setups. Regardless of what you do, again, take partial profits as offered and honor your stops. It never ceases to amaze me that the market itself via protective stops will keep you in the winners and take you out of the losers. Think if you must but let the market be the final arbiter.

Best of luck with your trading today!

Dave