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Random ThoughtsMarkets go up and markets go down. I know, duh implied but you’d be surprised how many expect the markets to only go up. In ’08, the average mutual fund lost over 40%. Obviously, you would think that these “pros” would know better.
I guess at one point I lived in a glass house. I was fortunate enough to hook up with some “old school” guys early in my career. These old salts had weathered a few storms. I was drinking my own Kool-Aid back in back in late 90s and didn’t want to believe the money machine was coming to an end in early 2000. I watched these previously very bullish traders begin shorting. When I asked one why, he said, very slowly, “because…the …market… is… going….down-?”—again, duh implied.
Some Good Advice For Life Too
Last week, I was shopping for antique sinks with my wife Marcy-oh, you single guys laugh now, but in 10-years, you’ll be doing the same. Anyway, we waited in an hot New Orleans warehouse for what seemed like eternity for assistance-long enough to where we were both drenched in sweat (in other words, about a minute and a half in this “Hot, Africa hot*” environment). Once the salesperson finally arrived, Marcy asked her a question and the lady responded “keep it simple, stupid.” I think she paused a little too long before the “stupid.” Needless to say, we purchased sinks elsewhere. Of course, I found this much more amusing than my bride.
And Your Point Is?
I’m a bit of a weekend warrior do-it-yourself kind of guy. And, lately, I’ve been faced with some challenging remodeling issues. I’m Mr. Keep-it-simple-stupid in the markets but in my own life, maybe I overthink things. This brought me back to the markets. It seems that many strive to simplify their lives but complicate things when it comes to the markets.
What Would Steve Say?
Tom McClellan recently wrote about an experience he had while once on a panel with Steve Todd. When asked how to identify trend, Steve said “Is you is, or is you ain’t in an uptrend?”
“Steve is from Alabama, so you’ll have to mentally apply the deep baritone and southern accent. He went on to say that the answer is usually pretty much self-evident, and the action resulting from that answer is usually the correct one.”
Up Or Down, Answer The Question!
Okay Big Dave, your antique shopping stories have me sitting on the edge of my seat, but can we talk about the markets? Up or down?
You want the truth? Can you handle the truth? Well, down for now. This doesn’t mean that we won’t have sharp retrace rallies in between. Exhibit A: Futures are up over 1 ½% as I compose this prose.
It’s just that the signs are there. As my good friend Greg Morris said in Investing With The Trend we treat every signal as if it were the “big one.” So, is this the big one? I dunno but it doesn’t look too good. Again, the market has a mountain of overhead supply, there are daily and multi-day sell signals such as the Bowtie(s), and quite simply, the market (basis the S&P 500) recently dropped over 12% in just over a month. I think the damage is done and the market has it work cut out for it. Go back a few weeks into my column archives and watch my recent Youtubes for more on the signals and setups.
So What Do We Do?
You do what you always do. First, honor your stops and be super selective. Again, over the past few months, we have been slowly stopped out of all of our longs and being selective has kept us out of new ones (with the exception of an oil ETF just recently). Look at your setups and ask yourself, is this really the mother-of-all setups? If not, then pass. I’m not a big fan of the short side but I’ll probably stop saying that so much. As a trader, we need to be agnostic. If you can’t be in the trend you love, then love the trend you’re in-up or down.
Best of luck with your trading today!
Dave
*from Biloxi Blues
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