Morning Market Thoughts
Good morning. Futures are up a bit this morning, indicating a higher open. Consider the strong close on Friday, where the S&P closed up by .52% with a closing location price just slightly off the high. Trading volume was above average, mostly due to expiration Friday. Comparing the intraday low on Thursday to Friday’s closing price, the S&P has rallied about 1%.This is what strong markets do. While it’s important not to worship at the alter of the bull, where your faith in a perpetual bull market trumps all evidence to the contrary, it’s of even greater importance to avoid the common belief that “this market is wrong. The ‘Big One’ is right around the corner.” Think about this. It’s a lot easier, and more profitable, to have an exit plan when there is evidence of a market reversal than it is to have an entry plan AFTER the big correction has occurred. In the former scenario, you’re making money with an exit plan in place. In the latter scenario, you’re standing at the station waiting for a train that may be many miles away. You see the trains going in the opposite direction on a regular basis. But you are going to wait patiently for your train. You are a sideline sitter. Nothing wrong with sitting on the sidelines because you won’t lose money. But you won’t make any either.
By waiting patiently for the Bear Train, you stand the risk of capitulating at the worst possible time. Sideline sitters can get frustrated as they see others making money. At some point, that frustration leads to action. Often times, the frustration reaches its peak right before the fall. Why? Because human nature is human nature. We are all wired the same. At some point, the last of the sideline sitters decide that they’re never going to get what they’ve been waiting for. So they jump on the tracks and sprint to the platform on the other side of the station, intending to catch the next Bull Train.
You know what happens next.
About halfway through their sprint to the other side of the station, the Bear Train comes rolling into the station without even blowing the whistle of warning.
Splat!
As long as the trend is higher, be involved in stocks. Be invested.
Each evening I post my trading notes along with the Strategy Session video. I’ve adopted a more detailed and specific format so that these notes can serve as a starting place for your own notes, highlighting stocks that are working and thus worth holding, stocks that are not working, and stocks that are close to entry points. I look at price action, volume, patterns, fundamentals, and the health of the broader market. These notes are intended to help you develop your own decision making and action taking process.
Everybody needs a plan to succeed, whether it is for the next trade, or for the rest of your life. Without a plan, you’re just drifting without direction and relying on luck to guide you.
Do you have a plan?
–Dan
Market Update