Yesterday was a very tricky day as the market pushed through resistance and then closed back below, giving us a potential outside day or Red Dog Reversal. These are the types of days you have to take notice of. Most high beta tech had a quick push and then failed quickly, showing a chink in the armor, but for the most part it was nothing brutal (except in the case of NFLX, which put in a nasty red bar on high volume). Money flew into oil stocks early last week, and they held up well, especially BP. They were instrumental in helping the S&P hold the the upper range at 1130-1150.
The market did not fall apart at the end of the day, which didn’t make yesterday as extreme as it could have been. Typically first few days of a new month are strong as new monthly/quarterly money needs to be put to work. Does new money continue to flow into the strongest stocks as they build new high level consolidations, or do the forces at will that “marked them up” let the tree shake a bit? As of now, we have a ton of new upper ranges to watch and see if they remain intact. Will we see our first real signs of a pull in? I am in the camp that we close the year around 1180-1200 in the S&P, but that bias will not dictate my trading. I will look to remain light on my feet given the implications of our poor market structure, where the stairs up elevator down especially holds trye. Entries and exits are still key, and being in the right sector at the right time will be key also moving forward.
If you’re an experienced market participant you know that typically you can make your entire year in the 4th quarter. If you go on a run and perform well this can be one of the most active three months of the year.
But, it won’t happen on its own if you don’t continue to strengthen your skill set. You can’t make excuses on why you missed a move, or why you fought a move? Look inside yourself and ask probing questions. This weekend is as good a time as any to really look at how you handled last month, or last quarter, and really make a concerted effort to build on your strengths and work on your weaknesses.
I know for me, I identify where the money is going and execute great cash flow trigger points. But I often don’t hold my size long enough, and typically move on to the next trade too early. Sometimes I will make a call, and get out of the trade earlier than I even recommended because of short term gyrations in the market. You never go broke taking profits, but in these market conditions you can’t sweat every up or down tick in a stock. That is what the computers want you to do. At the same time, though, it keeps me out of a lot of danger.
I know I could make a lot more money if I tried to keep original size and last tier longer and let the market make me money. It’s like Rich Dad, Poor Dad says, don’t work for money, let money work for you!
Examples: Buying a ton of Google (GOOG) around 482-485, I was done with the trade around 495, and the move went to 535 quickly.
Buying size in Apple (AAPL) around 256, I didn’t hold size long enough to really maximize gains.
Even more recently I listed BP at 38.50-39 on Monday and had a tier 4 size, but sold the vast majority around 40.25. Three days later it is at 42.
Another weakness I have is trying to be in a little early to a potential “big move” and after being a few days early I get a bit fatigued before the real trade ignites. I take less size then I had or wanted to have, because I was worn out from stalking the trade.
So even after 15 years and countless hours of preparation and self-evaluation, a market participant is always trying to perfect his craft. The moment you stop trying to get better is the moment you should hang it up. The market is a quickly evolving creature, and it is on you to change with it.
