9 DIVERGENT THOUGHTS TO GET YOU THROUGH THE REST OF THE TRADING WEEK
- An old magician's trick: The market has everyone looking one way while the real magic is taking place elsewhere. In this case, the put/call ratio seems to be throwing people off the scent. The more sophisticated among us seem to think this signals an impending pullback. I beg and plead to differ. The low put/call ratio is the diversion. Pay it no mind as it is only good for a few shekles on the downside, at most.
- The real magic is the symmetry with which both the SOX and S&P have moved off key trajectory points. The weekly review on 9-2, I pointed out that continuing strength in the SOX into the end of that week would be a buy signal. The buy signal did come at the end of last week. Here we are now rising steadily forward. This is no coincidence. Symmetrical markets (markets that respect their trajectory points with volatile upside reactions) are healthy markets.
- Financials are now in an uptrend, adding a valuable cog to the engine of the market.
- Speaking of financials, I will reiterate the fact that regional bank companies are exhibiting a symphony of bullish behavior that is an absolute delight for anyone that thinks beyond a 6-12 month time horizon. It has been a long time since I have seen a sector that has seen (1) rapidly improving balance sheets (2) tremendous insider buying (3) a return to profitability (4) a technical picture that is brilliant. This is across the sector, in literally dozens of names. My favorite sector in the markets currently.
- You want a buy signal that is perhaps more exciting than the SOX recently? The Nasdaq Composite at multi-year highs is it. I discussed the fact that the Nasdaq was back in the bulls court this past weekend here.
- Transports are now back in an uptrend. Another bullish indicator.
- I've received several questions regarding IWSY recently. I am happy with my sales from 2.20-2.70. The stock was confusing to me during August when I reinitiated the position and then quickly sold it. The stock remains an enigma now. Don't know what to make of it at this point. Fortunately, I am not in the business of trading "don't know." I invest in clear situations where I have a complete grasp of the risk, the reward, the catalysts and the technicals.
- Regret during bull markets comes in the forms of adhering to proven risk strategies. This way, traders become comfortable enough being reckless that the next bear market or even correction that comes along can cause serious damage. Getting out of positions early or unnecessarily is the normal course of events during any bull market. Regretting those decisions is also fairly normal. My regret currently is with selling MITL in the 3 range when it is now in the 5 range and looking tremendously strong. Does this mean I loosen up my risk parameters because I got shaken? Nope. I'm in this for the long-term. With that attitude needs to come a level of consistency that remains unswayed the hands of the market. Bottom line.
- I'll end with the following point. I've been through the great bull market of the 90s. I've been through the weird bull market from 2003-2007. I've studied all the bull markets from the 1920s forward. In all my experience, I have not ever thought ONCE that trading your way through a bull market was the path to wealth. Investing in bull markets creates the greatest return on investment, by far. Too many market participants are starry-eyed about vigorous trading being the path towards financial independence.
During the days I worked on the retail trading desk for TD Bank (known back then as Waterhouse) I saw literally hundreds of "talented" traders burn out. Less than 5% of the accounts I saw were successful over the long-term. The bear market of 2000-2002 likely did them in, as well. Being a trader is a romanticized way of making a living out of the markets. Yes, it certainly is attainable. The cost of tuition is tremendously high, however. And so is the cost in time. The greatest opportunities over the next several years will be in taking well thought out positions and sitting tight.
There is no glory in impatience.
