A long weekend to be sure, but despite the energy expended digesting food and hanging out with family, I feel pretty lively this morning. The market, however, is a bit listless right out of the gate, especially after such a lively day last Friday. I suspect those traders thought it was a buying day, ya know, scooping up the bargains. I guess they were not alone …
- Black Friday retail sales online this year topped $1 billion for the first time ever as more consumers used the Internet do their early holiday shopping.
Sales in general seemed good, even if the “season” opened a day earlier, depleting sales from the big day. We will know more about this when the consumer confidence numbers come out this week, but my guess is the consumer is still out there working hard to support the economy …
One of the great maxims in this game is “follow the money.” Over time, this saying has been perverted to “follow the smart money.” My problem with this new version is that I don’t believe there is much “smart” money out there. I have little faith in analysts, less faith in economists, and the big boys on the street are often wrong in the direction they choose …
- Just 13 percent of the so-called smartest money on the Street are outperforming the S&P 500, and a fifth of all hedge funds are actually in the red during 2012, according to Goldman Sachs data.
No, I rarely listen to the folks telling us which way to go in the market, especially in a news-driven market. On any given day, the fundamentals are ignored in favor of the latest rumor or sensationalized headline. The fact is that there is “smart” money and there is money moving in volume. I prefer the latter. For example, I track volume in the market and in markets. When money is moving, that is a directional sign. I also find momentum indicators helpful. These overbought/oversold numbers are telltale signs of money moving or about to move.
I have written about it before, but I can’t speak highly enough about the VIX as an indicator of money moving. Right now, the VIX is telling me money is staying put. The overall low volume in the market supports this. As well, money flowing in and out of mutual funds suggests direction. Money flowing out of mutual funds is less important than money flowing in. Money flowing out is often just fear and money flowing in suggests investor confidence. Money flowing in also suggests consumer confidence, as mutual fund money comes from the folks who make the economy run, which is most of us. So, the next time Mr. or Ms. XYZ from BIG Firm A tells you which way the market is going, smile and refrain from listening, unless, of course, you know their track record and it is a good one …
- Would you at least give an example of a good trading plan?
The question above is a follow up to my response to a reader’s question about how to develop or acquire a trading plan. In my response then, I outlined the basics of a trading plan, and I suggested that developing a trading plan depended on the personal needs/desires/capabilities of the trader. I stand by that and so I cannot give you an example of a “good” trading plan. I can reiterate, though, a good plan should contain at a minimum, the basic elements of markets to trade, money management, profit and loss targets, parameters for entry and exits, software tools, and ongoing education.
Trade in the day; Invest in your life …
