How To Snatch The Pebble

Random Thoughts

Milestone media celebrations seem to put the gris gris on the markets. On Tuesday, the hype over the Quack (Nasdaq) suggested that you better hurry or you’re going to miss the boat.

Don’t get me wrong, as a trend follower I’m happy that the market is making new highs but it’s just another day. Follow through is always key. And, obviously after less than 24 hours of celebration we now once have a 4 in the 1000s column. No big deal. The Quack has been long overdue for a correction.

The nature of that correction will be key. If it’s sharp but quick—ala a Trend Knockout (TKO)–then it could shake out the nervous nellies, fast money, and Johnny Come Latelies. It would also attract some eager shorts. This could actually clear the way for the market to head higher. See Education for more on TKOs and check out my Youtube Channel.

So, a correction would be good in the Quack. Unfortunately, for the Ps and Rusty no so much. Since they haven’t cleared their ranges decisively, any meaningful corrective action would put them back into the soup. This would force me to dust off my sideways arrows—something I’m not too keen about doing.

The good news is that we don’t have to figure it all out today. It’s a no brainer on existing positions. Stops will keep us in if trend remains our friend. And, stops will take us out if it doesn’t—hopefully at a profit so we can say “so long and thanks for all the fish.” A good defense is a great thing but never forget that a good offense if often your best defense. This is why it put so much time and effort into my Stock Selection Course (shameless plug—click here for a special offer). Pick the best stocks to begin with and money management will often take care of itself. Before putting capital in harm’s way, always ask yourself, do I really really like this setup? Is there anything out there that’s better? And, last but not least, always weigh that against the option of not taking any action while waiting for better opportunities.

With only a modest sell off, most sectors still remain in uptrends and are only pulling back a bit. As pullback players, this could actually create opportunities for us.

So what do we do? First, continue to err on the side of the trend as long as the breakouts in the indices remain intact. Second, again, make sure you that are picking the best stocks to begin with. Third, since the market is a little soft—based on yesterday’s action and weak futures this morning—make sure that you wait for entries. I’m amazed at how many times that in and of itself can keep you out of losing trades. And, forth, as usual, honor your stops once triggered. Do these four things and do them well Grasshopper and you’ll soon be snatching the pebble from my hand.

Best of luck with your trading today!

Dave