Morning Market Thoughts
Good morning. I’m not seeing much in the way of market moving news this morning, but the market is moving. The midcaps and small caps are getting my attention.The S&P Midcap ETF ($MDY) is up at levels not seen since last August, and is starting to break out of a 10 point range that resembles a cup & handle pattern. So that’s powerful. The Russell 2000 Index Fund ($IWM) is very close to breaking out, but is still struggling with an April high. But the strength of these two important indexes relative to the major indexes ($SPX, $DJI, $DJT, $COMPQX) is important. They tend to lag breakouts, but are necessary to confirm any new move in the broader market. So it’s nice to see them getting the job done early.
Two factors that should be in your sights are the Fed’s decision on interest rates in a couple of weeks, and the fact that China is posting some pretty weak economic data. And when China’s economy starts to bog down, it negatively impacts the rest of the globe. So, if this persists, we may start seeing some weaker than expected economic numbers in the U.S., and that will be a problem for the Fed, as well as all of the folks who are still struggling in an economy that is supposedly recovering, but the recovery just hasn’t quite made it to their house yet.
But for now, it is extremely important that you respect what you are seeing on the stock charts. Seriously, you do NOT know more than the charts you are studying. You do not KNOW that the S&P will be unable to break up to 2,120 and beyond. You do NOT know what we will see a big selloff in the weeks or months to come just because you’re hearing a lot of pundits discussing it.
You must accept and embrace the fact that the market will do things that are completely illogical and just seem “wrong.” But when you start giving way to the patterns of stock movement rather than trying to predict what the next one will be, you will find it easier to make money. When you focus on reacting (via a trading plan) rather than predicting, you’ll do just fine.
And by the way, “reacting” to price movement often equates to deciding to do nothing. The act of not doing anything–of sitting on your hands–is indeed an action, so long as it is based on a decision rather than complacency.
And one thing I cannot emphasize enough is the importance of journaling all of your trades. If you start doing that (and yes, I’m talking to YOU), you will identify your weak tendencies very very soon. And just the act of journaling, without any additional effort, will improve your trading.
Don’t believe me? Then go ahead and try to prove me wrong. You can’t lose — you will lose in your effort to prove me wrong…but in the process, you will win because you’ll start making money.
See you in the forum.
Dan
Oh, one more thing — congrats to Golden State, who took the best of 7 series from the Oklahoma City Thunder. I can’t say that the team with the best PLAYERS and the deepest BENCH won…but I will say that the best TEAM won. So much individual talent on OKC — very fun to watch. The nickname of the Steph Curry and Klay Thompson speaks for itself — the Splash Brothers. When the 3-point bombs start falling in from all over the court, the game becomes a math equation: 3 – 2 = +1. All those 1’s add up over the course of a game. Fun series to watch! If you’re a basketball fan, I hope you caught some of it.
Market Update