My experience is that such people are rarely actually invested in the market, but they enjoy their commentary from the sidelines. Those of us who are in the market can of course be branded as the hopeful bears – sure we want the market to go in one direction and that is up and one could accuse us of talking the market up. It takes much more than our talk to move markets.
||Since the commencement of Trading Tutors Weekly Review, I have spoken cautiously about what I believe to be a mild, bull recovery market. The market is now starting to develop some momentum but it is still in my view in its early stages. Yet there are plenty of “doubting Thomases”. A feature of changing markets is the eternal bear – the pessimist – the trader whose glass is half empty.
I would like however to give ourselves a little more credit for viewing the market independently and as objectively as we can. Being detached is the hallmark of the successful trader. Call the market as it is.
At the risk of being repetitive – I stress the markets are dynamic – not static – they are constantly changing and so one assesses each day, week or month the impact the previous period’s action has on the market.
This is not without necessarily any preferences as to whether the market is moving up, down or sideways. In today’s markets it matters little, which way the markets move, as there is always a strategy that can be profitable. These strategies whether they be selling short, options or futures are much more readily available to the retail market than ever before. Success in all of these is still inextricably linked to your view of the underlying instrument and its future price movement. Thus the only major influence as to the type of trade you might take, is one of knowledge of that particular strategy or technique. This requires you to constantly broaden your knowledge and hone your skills beyond merely going long on shares.
Without doubt it is much easier to play a trending market and there are very few global equity markets that are not trending upwards at the moment. Up until recently many markets were trending up only on a “daily” basis but now the weekly charts also confirm a rally.
The rally has legs. How far? I am always reluctant to say, as one cannot give a finite answer – because the markets are dynamic – always changing. I appreciate the many accolades for hitting the “bulls eye” as one reader described it in Issue #4: 28th April 2003 – but I am also sufficiently realistic to know one can also easily get it wrong – when I do I will let you know before you let me know!!
If we are going to be truly objective in our dealings in the market we need to be detached from any view of what level the market might reach. What pinnacle the market reaches is not so important as recognizing that you are actually at the top. Generally we will get good notice at the peak.
In this newsletter we aim to be independent and contrarian in our thinking. Not for the sake of being different, but rather this is an essential skill in succeeding – being able to observe mass behavior rather than being caught up in it. So as others climb on board we now turn our minds to possible exit points even though for some of our holdings this could be a long way away.
Remember also the golden rule: that regardless of which direction the market might be headed, sectors can be moving in a counter-cyclical direction.
So for the moment I move with the weight of money in the market until I have evidence to think otherwise. The view I expressed in Issue #4: 28th April 2003 still stands – if this level of momentum continues we should see the market head towards 3170 in the medium term, with the usual minor corrections along the way. As with all my analysis I am using Eliott Wave combined with extension and retracement theory. The principles behind these techniques have been covered in various articles by Aaron and Noel and will be further reviewed in future articles
Enjoy the ride!