ANOTHER SIMPLE RULE THAT WILL HELP YOU CULTIVATE VOICES IN YOUR HEAD
There are simple, niche rules that I like to use in an attempt to understand the illogical, treacherous nature of the financial markets. One of the many niche rules I have is that of a dodged worst case scenario. What do I mean by "dodged worst case scenario"?
Coming into trading on Monday I thought that the odds heavily favored the bears being able to seize control of the markets early and not allowing the bulls a chance to resurface. I wasn't expecting a devastating decline by any means. However, I also wasn't expecting the bulls to be able to turn what should have been a bad day into a run of the mill down day.
The bulls managed to dodge the worst case scenario by a wide margin. The bears failed to capitalize. What does that tell you as an investor?
It is similar to a football team that recovers a fumble and then is unable to score 20 yards away from the end zone. Failing to capitalize on such an opportunity usually means that your football team has numerous weaknesses. Weaknesses that will prohibit that team from being able to make a run for the playoffs or even finish the season with a winning record.
The bears failed to capitalize on an opportunity to take the markets down....again. The bulls showed that they have full control over the markets by salvaging what could have been a 1% plus down day in the major averages....again. Bulls win and bears lose....again.
Here is another example of it from my weekly chart review three weeks ago:
GLD
If you read the notes on the chart by the blue box, you can see how the bears failed to take advantage of a fumble by the bulls in May. From that point on the bulls just held onto control of the ball, burning down the clock, until they scored a devastatingly effective series of touchdowns with the recent move in gold.
The bulls dodged the worst case scenario in GLD by a mile. The bears failed to capitalize. The result: a record move in gold prices to the upside over the past few weeks.
The markets are always speaking to you. Every single day. You just have to quiet your voice (read: ego) and listen to the only voice that matters.
