You Shouldn’t Be Freaking Out

Random Thoughts

Whenever the market has a bit of a spill, I receive emails like: “What should I do?”, “Is this THE top?”, “I’m freaking out”, etc…

What you should do is follow your plan. Don’t have one? Get one on your next trade. Then, you won’t have to email me. And, if you do, I’ll just tell you to follow your plan. My work is done. Thank you, thank you very much. Big Dave has left the building.

I know it’s cliché but I’ll say it anyway: plan your trade and trade your plan.

You shouldn’t be freaking out. Yeah, drop an F-bomb if you must but as long as you’re following you plan, you shouldn’t get too emotional. You will get whacked here and there. If there weren’t adverse moves then everybody would be doing it.

So, Big Dave, is this THE top? No. A few down days doesn’t signify a top. Yes, the Chicken Littles come out and scream that the sky is falling. And, some day, they will be right. Predict early and often I suppose.
Do, as always, honor your stops just in case. Do not make any drastic changes. As I preached in a webinar a while back, even if I had a crystal ball that told me the market would sell off hard in late January, I made more money by staying the course. Of course, the market won’t always come back and you won’t always make money when it does but more often than not, following your plan is the way to go.

Let’s look at Wednesday’s scoreboard.

The Ps dipped in early trading but quickly found their low and recovered. They ended in flatsville for the day but that’s much better than a poke-in-the-eye considering where they started the day.

The Quack put in a more impressive recovery. It managed to end 1/3% higher.

The Rusty put in a somewhat similar performance.

I like that the market dipped a bit after flat lining. After a compression in volatility, you often get a “fakeout” move before the real move. Considering that the longer-term trend remains up, maybe the recent slide will help clear the way for the market to trade higher.

Regardless, I view the action as healthy–a little shakeout in the spirit of a Trend Knockout.

In the sectors, as you would expect, stronger areas like Internet and the Semis stabilized in their pullbacks. Again, this isn’t a shocker when you look at the action in the tech filled Quack.

Gold put in an impressive performance. It appears to be breaking out of its short-term consolidation. Again, I still think the mother-of-all bottoms remains in place here. You’re welcome!

Silver wasn’t as impressive but it did catch a bid. It looks like it wants to play catchup to the Gold stocks.

Speaking of the Metals & Mining, Uranium has stabilized in its pullback and looks poised to make another leg higher. “I feel it in my bones, enough to make my systems blow.” Too obscure?

China stocks appear to be stabilizing in their pullback. They look poised to make a new leg higher.

Bonds bounced back nicely. It is good to see rates stabilize.

So what do we do? I think it’s a setup by setup sort of market. For the most part, look for setups in the aforementioned areas, especially China and Uranium. As usual, warning-preaching ahead, wait for entries and honor your stops once triggered. Said alternatively, follow your plan.

Futures are firm pre-market.

Best of luck with your trading today!

Dave

P.S. Chart show today. If you are not busy saving lives or doing other great things, then stop by.