Gaining Self-ControlMarket & Sector Review
This Week's Economic Reports
Gaining Self-Control
Are you having trouble trading with consistency? Does your account balance rise and fall sporadically and do you experience a rollercoaster of emotions? Chances are you plan your trades, but is it likely that you don't stick with your plan? Sometimes you follow your plan, but at other times you abandon it on a whim. You need to practice discipline. I'm sure you have heard countless times, "the winning trader is a disciplined trader". If you have a problem with discipline its worth building up this skill.
Some are highly disciplined and very self controlled and others are impulsive. Which are you? The very disciplined person follows rules methodically, and is careful to control his or her impulses. If you are not this type I'm sure you know someone who is. They pay off their credit card bills every month, they are never late for an appointment, the plan every detail of their lives. Although these characteristics can be ideal for trading they are not always. This personality type tends to have trouble taking risks, preferring a sure thing, and trading outcomes are rarely sure things. Often winning traders are the kind of people who prefer living a little on the wild side. They don't recklessly seek out risk like a gambler does but they don't mind it. Relatively speaking, they do tend to lack discipline and self control. Perhaps that's why so many trading books and coaches find it necessary to remind novice traders to practice discipline and self-control. How is your discipline and self-control? Do you have trouble sticking to your trading plan?
If you have trouble with discipline, you may want to try a stimulating exercise to increase your awareness: Observe your level of self-control in your everyday life and try to gain more. How much discipline and self-control do you practice in your everyday life? Are you late for appointments? Do you spend more money each month than your budget allows? Do you frequently find yourself breaking promises? It's not necessarily the case that a disciplined trader is disciplined in all aspects of his or her life, but it helps. The life approach we use in everyday life may blend over into our trading life.
Try this exercise: spend a few weeks trying to control as much of your life as possible. Pick specific areas where you can gain more self-control. Control your caloric intake, the money you spend, and time spent in leisure activities. See how well you do. It may change your reference point. You may soon discover that you rarely control your impulses, and can do much better. And this in turn may positively influence your ability to stick with your trading plan. It's worth trying. Discipline is the key to trading success, and it's vital that we do everything we can to increase it.
Market & Sector Review
The bears have been coming out of the woodwork on many stock market message boards this past week. Many calling for a stock market crash which they believe is eminent. I nor no one else knows for sure if the stock market will crash but in my 38 years of involvement I have seen but one crash and that was October 19, 1987 when the market lost some 20% in one day, now that's a crash not 2% ( about what we are off the recent highs). If the crash prognosticators are right so be it, but that's not what I see at all, not at the present time anyway. Not a lot changed this week except that the market has been consolidating its recent losses. My thinking now is for just a normal correction, possibly just a consolidation, and another speculative buying opportunity.
Like I have said many times before, this cyclical bull market is now maturing - and like the good investors or traders we are (or attempt to be), we should be conscious about this and plan accordingly. That being said, I still have in the back of my head that we have not seen the final blow off stage of this market which historically marks the end of bull markets, just as capitulation often marks the end of bear markets. So while the clock is turning me bearish over the intermediate to longer term the conditions for a crash or even the return of the big bad bear just don't seem to be right yet. In fact on Friday (admittedly a low volume pre holiday session) I had to be impressed by the fact the Oil rose over $2.00 per barrel in a single day, the bond market declined, giving the market even on a day like Friday all the reason in the world to follow through on the downside. It did not! So lets look a moment at the big picture.
This begs the question are we in a similar low risk entry zone as we were in late January - early February and late April - early May of this year? While no one knows for sure this same analysis has worked for me twice already this year and I will continue with it until it works no longer. I think you look at any weakness over the next couple of weeks as a buying opportunity with limited risk, and limited risk is the key to this analysis and what I always consider first. It is important to remember that whether I am right or wrong in this particular analysis bullish participation has been narrowing. The following chart is courtesy of Carl Swenlin (decisionpoint.com) shows the narrower and narrower participation in the S&P Small Cap 600 index over the last year and a half.
Putting the two charts above together it suggests that stock selection will be of utmost importance. Should you choose to participate on the long side, look at where the money is flowing during this market respite? One way is to check through the most improved list put together for each newsletter:
MG 422 above made a new high for this move on Friday; MG 913 has been making successive all time highs for over a year; the same is true for MG 527 and MG 523. These groups contain some good looking stocks, check them out. Are they overextended? In some cases perhaps so but if there is indeed one more speculative up leg left in this bull, leadership could come from these groups.
Keep in mind that in this persons humble opinion we are in the very late stages of this cyclical bull market. Trying to get the last out of the bull can be a frustrating but at the same time an exciting time. Earlier this week while exchanging e-mails with a subscriber who has become a very good friend over the years I told him I was becoming bearish. He suggested perhaps I could write about how to go about shorting stocks in the newsletter. I think its a good idea and will do so next week just prior to vacation. Selling stocks short is not for everyone, in fact its for a small minority of traders only. However we will talk more about that next week.
And finally something I've never seen before but found very interesting. Everyone knows what a fan of sentiment that I am and the wide variety of ways there is to measure sentiment. In fact I receive statistics on the readership of this letter each week (in percentage terms) and have noticed wide fluctuations depending evidently upon the markets action the previous week or couple of weeks. I have noticed that readership reaches a low point near market low points then increases dramatically as we near peaks. I have not kept good enough statistics or for long enough to use that data as yet but I will have to work on it. Now this! I am and have been a long term bull on Gold in fact all commodities in general believing that we are in a multi-decade bull market. As someone said to me the CRB (Commodity Research Bureau Index) is today where the S&P was in the early 1980's. I'm not sure if I totally agree with that but I am not in disagreement either. For those unfamiliar with commodities and commodity stock bull markets they tend to last a long, long time and at times become extremly volatile. Recent Oil price moves are a good standard for that volatility. Sentiment being an early sign of impending tops and bottoms. Here are two Internet sites dedicated to the yellow precious metal - Gold and the fluctuations in viewership they have received over the last two years -> Interesting Chart!
Have A Great Week!BillDisclaimer:Trading in securities, of any type, may not be suitable for all individuals. The contents of this newsletter are not a solicitation to buy or sell securities. The opinions expressed are solely that of the author. You must do your own research, contact your own financial advisor for suitability of any investments. Data gathered is from sources believed to be reliable, but NO guarantee as to their accuracy is made.
This begs the question are we in a similar low risk entry zone as we were in late January - early February and late April - early May of this year? While no one knows for sure this same analysis has worked for me twice already this year and I will continue with it until it works no longer. I think you look at any weakness over the next couple of weeks as a buying opportunity with limited risk, and limited risk is the key to this analysis and what I always consider first. It is important to remember that whether I am right or wrong in this particular analysis bullish participation has been narrowing. The following chart is courtesy of Carl Swenlin (
MG 422 above made a new high for this move on Friday; MG 913 has been making successive all time highs for over a year; the same is true for MG 527 and MG 523. These groups contain some good looking stocks, check them out. Are they overextended? In some cases perhaps so but if there is indeed one more speculative up leg left in this bull, leadership could come from these groups.
Keep in mind that in this persons humble opinion we are in the very late stages of this cyclical bull market. Trying to get the last out of the bull can be a frustrating but at the same time an exciting time. Earlier this week while exchanging e-mails with a subscriber who has become a very good friend over the years I told him I was becoming bearish. He suggested perhaps I could write about how to go about shorting stocks in the newsletter. I think its a good idea and will do so next week just prior to vacation. Selling stocks short is not for everyone, in fact its for a small minority of traders only. However we will talk more about that next week.
And finally something I've never seen before but found very interesting. Everyone knows what a fan of sentiment that I am and the wide variety of ways there is to measure sentiment. In fact I receive statistics on the readership of this letter each week (in percentage terms) and have noticed wide fluctuations depending evidently upon the markets action the previous week or couple of weeks. I have noticed that readership reaches a low point near market low points then increases dramatically as we near peaks. I have not kept good enough statistics or for long enough to use that data as yet but I will have to work on it. Now this! I am and have been a long term bull on Gold in fact all commodities in general believing that we are in a multi-decade bull market. As someone said to me the CRB (Commodity Research Bureau Index) is today where the S&P was in the early 1980's. I'm not sure if I totally agree with that but I am not in disagreement either. For those unfamiliar with commodities and commodity stock bull markets they tend to last a long, long time and at times become extremly volatile. Recent Oil price moves are a good standard for that volatility. Sentiment being an early sign of impending tops and bottoms. Here are two Internet sites dedicated to the yellow precious metal - Gold and the fluctuations in viewership they have received over the last two years -> Interesting Chart!
