WHAT TO DO IN THE MARKET NOW? KEEP IT SIMPLE STUPID
You have to make it simple for yourself here. It is the only way to get past this period unscathed. Yes, unscathed. You cannot make money in every single market environment. There hasn't been a man on Earth who has been able to accomplish this feat over a long period of time. Those that have tried typically end up being talked about in the past tense with respect to their financial careers. Get out of difficult periods in one piece and you are 10 steps ahead of the competition.
How do I plan on making it simple for myself here? I discussed earlier this week how I have developed ways of dealing with weaknesses I have in trading and investing. I have created mechanical methods to take ME out of the equation completely. This way I will not, under any circumstance, allow the market to do exactly what it is trying to do at such junctures within the greater trend: Confuse, dismay and create a smoke screen that causes me to begin giving away my gains for the year as if I was an bikini manufacturer in Afghanistan.
My short-term (3-4 weeks) trend indicator turned down on Tuesday for the first time since November. This is part of the systematic portion of my investing that takes over during difficult periods. I have learned not to go against it.
Seasonals, technicals and fundamentals are all screaming CHOP here. Chop is meant to throw you off course. It is the equivalent of throwing a well-seasoned, 8oz. steak in front a hungry guard dog. No matter how hard it tries to guard the fort from that point, the confusion of hunger will drive the dog to do its job much less effectively.
You are much the same. No matter how smart you think are, choppy seas will have a profound effect on your psychology. A sideways range creates self-doubt, anxiety and worst of all over-analysis of the situation at hand. You begin to over-think. You begin to rely on the opinions of others. You begin to dwell on decisions you make or choose not to make. You begin looking at the market through a completely different lens than the one which made you money in the past.
This is all by design to force you off balance so that you will take your eye of the ball, missing the big move that lies ahead. Every experienced trader has different ways of dealing such periods. The key word is experienced. You can always separate an experienced trader or investor from an amateur from observing how he or she deals with such periods.
The experienced trader takes weaknesses into account and either avoids periods where their edge is not present or develops a method for mitigating risk during such times.
The amateur will simply treat such periods as every other period and apply a one size fits all approach. They either do not realize their method has been compromised or choose to ignore it because they do not want to perform the legwork to become a better trader or investor.
My plan of action from this point is focused on preservation of profits. I see a few different small-cap, restructuring plays that I would love to dive into here. However, I know that once the negative momentum or sideways momentum begins to build, it influences all companies regardless of market-cap or industry. I will simply wait for my short-term trend indicator to turn firmly to the upside before taking on any new positions within the portfolio.
In the meantime, I am fine with hanging onto PTGI, SYNC, CIS and DPTRQ. There is only one large position in this mix, the rest are of the small variety.
I'll be going over the various technical nuances that are screaming out "CHOPPY SEAS AHEAD" in my weekly chart review tomorrow.
