Morning Market Thoughts
So, it’s Wednesday morning and the futures are higher. JP Morgan (JPM) got the earnings season off to a rousing start with lousy earnngs…that were better than everyone thought! The stock is up about 2.5% pre-market. So let me get this straight — the investment community wasn’t looking for much except pain from Jaime Dimon. Dimon inflicted that pain. But the investing community flinched just a bit, shook it off, and said, “You didn’t hit me that hard. Is that all you got? Wussie!”So we see that profits fell 6.7%, thus confirming the bearish view of most market participants. And the stock rallies (albeit right back to resistance at $61). So….is this going to be the prevailing theme of earnings season? Report sub-standard numbers, get a bump in price.
That works for me. During many more times than I like to admit, I will spend some time NOT spending time reading news or getting information on stocks. (I also spend MORE time NOT tweeting and facebooking (I don’t know the password to my personal account, and have instructed my associates to refuse to give it to me if I ever ask. So far, I haven’t asked…and don’t plan to. At the risk of offending thousands of people, I’ll say what many think: Facebook is a waste of my time. It is a time sucker that really just makes you boring. And it is run by a guy who thinks that each of us secretly and unknowingly desires to connect with everyone else — like a dark room full of lost people, each seeking desperately to learn whether they are the only one in the room. So they reach out and try to make contact.
Me? I’m not too focused on posting my “perfect life” on a website available for public consumption and hacking. I’m too busy trying to create a perfect life — which is an alluring illusion that I try to achieve but constantly fall short. I don’t want an audience when I fail. Nor am I particularly interested in the efforts of others, except my close friends and family (a very small number)
Soooo, back on track. When you ignore the news and just look at charts with some degree of experience, I think you gain more clarity, not less. You probably can’t talk about the company at cocktail parties, but the good news is that you’ll be able to buy a round of cocktails for everyone because you know the only thing that matters — the stock is going up.
Just look at the charts in various timeframes and look for one answer to one question — is the stock trending?
If the answer is “no”, then I really don’t spend much time thinking about it. I hit the space bar on my keyboard and go to the next one on the list. I’ll make an exception if the chart shows a stock that, while not yet trending, is decisively breaking out of a base. We’ve seen those in the steel stocks, the oil & gas stocks, etc. But for the most part, I just want to see zig zaggy trends going from lower left to upper right. And I’m quite comfortable sitting through a prolonged period of consolidation as long as my uptrender is not breaking down. A good example is Amazon (AMZN). Through all of 2014, the stock tested the uptrend by drifting sideways to down. It lost 25% of its market cap. After that consolidation was complete, AMZN broke out and advanced 65% before peaking in December. If you are trading options, this type of chart will drive you nuts. But if you are trading the stock, this is just the normal ebb and flow that you can accept.
Right now, we’ve got some high profile stocks that are close to breaking out — Google (GOOGL) and Facebook (FB). Others are similarly positive. Steel and energy are also doing well.
So I’m more interested in what the high profile stocks and key sectors are DOING than I am in hearing what people are saying about them. The volume on my TV gets muted earlier and earlier in the morning, and I just watch the charts. When I get bored or overstimulated, I’ll push away from the desk and turn up the volume. Soon, l’ll get back to work in silence.
This is the type of market we are dealing with — bad news isn’t bad enough. Good news isn’t particularly good. My suggestion is that you first look for stocks that are trending. Next, look for an entry — and most stock do NOT give you entries very often. But you can input an alarm on your software so that you get alerted when the trending stock IS at a good buy point. Then you buy, insert your stop, and move on. You then let the stock work. Don’t overmanage it. Just let it work. At some point, you’ll take profits. But if you are patient, you’ll find yourself holding positions longer than you used to.
Patience is the key. And position size and entry are the keys to patience.
Do you have the keys?
Dan
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