The Secret To Trading

Random Thoughts

It was a flat-ish day in the market with slight loses of .04% and .07% in the Ps (S&P 500)  and Quack (Nasdaq) respectively.

The Rusty (IWM) still looks questionable. Although it finished off its worst levels, it still ended down around 1/4%. So far, its choppy downtrend remains intact and it has only rallied up enough to kiss its 50-day moving average goodbye.

Obviously, we didn’t see any follow through overall in yesterday’s market. And, as I preach, follow through will be key.

Although the indices didn’t do much, there were some pockets of strength that made the market seem a little better than the indices would suggest—just the opposite of what we’ve been seeing for quite some time.

The Defensive issues had a decent day. Foods and Energy hit new highs. In spite of weak Bonds, Utilities put in a decent rally and aren’t too far away from new highs.

The Semis had a good day, especially the big cap ones. The SMH closed at multi-year highs with vigor. True, over 30% of the index is INTC and TSM alone but it’s a good start nonetheless. Maybe lower tiered issues here and other technology will begin to follow suit.

It was good to see some pockets of strength but we will need some follow though for me to get excited. Considering this, not much has changed just yet.

So what do we do? Wait to see if more and more areas begin to improve and then look to get onboard on pullbacks. At the moment, the database isn’t producing much. I only wrote down a couple of stocks last night and see no reason to take new action. When the database speaks, it often pays to listen. I suppose in this case it doesn’t pay but it will keep you out of new trouble. The secret to trading is to recognize less-than-ideal conditions and then backing off during those times. Don’t worry. If things are great, you’ll know it. You can’t wait to wake up to see how much money you made overnight. Right now is not one of those times. The absolute worse thing you can do is to switch methodologies or time frames, thinking that something must be passing you by. Stick with a viable methodology, any viable methodology (it is not my way or the highway). Learn the nuances and don’t jump ship at the first signs of adversity.

Futures are weak pre-market.

Best of luck with your trading today!

Dave