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It snowed in our neck of the woods yesterday and freezing rain this morning has caused a two hour school delay. It's going to be an interesting morning since my daughter has to be at school at 10 AM and my dog has a groomer appointment at 11....
But I will put out as much content as I am able. Markets are continuing their bullish trajectory as indices set up JHook patterns. Following is the SPY chart along with a few others I am watching.
Futures are ripping on the good employment and consumer spending numbers. Just when we were getting used to the idea of good news being bad news, you all decided you are no longer afraid of the great "tapeer." Well I am glad to see it. SPY will be opening much higher this morning surpassing the 8 ema. The question is, do we get a gap and go or do investors take profits on the move. In any case, the many good chart set-ups that held up through the last few days of selling was a good clue that internals were still holding up. Many will open positively giving us buy signals in stocks. Here are a few to consider.
I often talk about the psychological aspects of trading. In my chat room I tell members that trading is 90% psychology and only 10% stock picking. Time and again I see traders who put all their energy into finding the right stock to buy. Moreover they get cocky about it.
There is a fine line between Confidence and Ego. Confidence is supremely necessary when it comes to trading profitably but too much Ego can be destructive. A trader must have enough confidence to take trades and let his strategy play out. There are many trading strategies out there and most of them work as the long as the trader is disciplined and sticks to a set of rules that keeps him adhering to that strategy without fail. The reason is that no one trader is any more likely to be a better stock picker than another but if you have confidence in your strategy, you will stay the course and likely be profitable over time. Ego on the other hand, can keep a trader in play long after a particular stock pick proves to be incorrect. This does not keep the odds in the trader's favor.
Trading is an odds game. My entire premise comes down to the idea of keeping the odds in my favor. Whether you are a support /resistance trader or a trend trader or a fundamentals trader, you still need to keep the odds in your favor. The data tells us that even the best traders on Wall St. only get their stock picks right about half the time, yet somehow they manage to be profitable. Even if your skill allows you to get your stock picks right more than half the time, say closer to 60% as I tend to do with candlesticks, it is best to expect half of those picks not to work. This allows the trader to drop losers early and without question or ego telling him it will work eventually. Likewise, it takes confidence to let a winning trade run and not cut it too early for fear of losing that gain.
Some years ago I decided to stave off trader chat rooms because I kept running into know-it-all traders who spent a lot of time pumping up their own egos by preying on the confidence of other traders. I wrote a piece several years back that I entitled, "Confessions of a Chat Room Slut." It was based on one such bad experience in a chat room. The culprit was the moderator himself. A self proclaimed stock trading guru and mentor who loved to knock down my confidence.
I had spent some time looking for that right mentor and all those folks out there bragging about how good they were got my attention. I, like many others of my kind, felt intimidated by their supreme trading skills as I saw them and assumed they knew better than I. I note that they are all men. This ego pumping phenomena is not as commonly seen in women traders.
In order to protect the folks in my world, I nicknamed this guru "Bill" in my writing...not his real name of course, but it allowed me to eschew his actions and vent my emotions. I soon realized that "Bill" was actually just selling a used car. He and others like him spend much time bragging and writing blog posts that insult their readers for not being as good they are. They do this, I assume, in order to keep their own confidence up pumping their egos to a nasty level. These same trading gurus never post their actual trade performance results in public. They are not actually selling their all supreme ability to trade after all. They are selling themselves in a vulgar manner that gets you to pay them money while they brag and prey on your confidence. Sometimes they even prey on your trades. You have likely run into a few of these. They talk about making tens of thousands of dollars each day but never mention position sizes and only talk about their winning trades. They abound on the Twitter-verse.
Not long after leaving "Bill" I met someone who really gave me a new perspective. His name is Dr. Doug Hirshhorn and he is a trading coach to elite traders and portfolio managers in the top firms on Wall St. I had come across his work by way of a piece he did pointing out why women make better traders than men. Okay, I admit this drew me in, but his reasoning was sound and touched on the idea of confidence vs ego. He talked about how women tend to be better managers of risk and see the bigger picture while men often let their egos get in the way and only see the now....while being more aggressive risk takers.
I soon found myself reading his book 8 Ways To Great which I purchased online. Dr. Doug became involved with coaching traders while pursuing a PhD in Sports Psychology. He became interested in applying those ideas to trading. One day while at the gym, I saw Doug Hirshhorn working out (harder than anyone else of course) and I walked up and introduced myself. We exchanged email addresses and phone numbers and I feel all the more wise to have had the chance to converse with him both by email and by phone on several occasions.
It was Doug who told me that I am just as likely to pick a winning stock as any of those "gurus" on the Twitter-sphere. I have since studied his work and am proud to say that it supremely changed the way I view trading and other traders. His most recent book, Trading Psychology Playbook, (I have a signed copy) enlightened me further. Although written for elite traders and portfolio managers, I have taken much of what he has imparted and translated it into what I share with the retail trading members of my chat room.
Yes, I have a chat room. But my goal has never been to sell a fish or my supreme trading strategy. And it certainly has not been to pump up my ego or puff out my chest. Believe me, my chest is big enough already. My goal has always been to teach others what I have learned, to fish, keeping in mind that the psychological aspect is 90% of the game. I keep my strategy simple. I don't add too many indicators and variables that could only serve to confuse the student. A very simple set of parameters to cover the 10% allows a trader to have confidence in his strategy. Too many indicators can spoil the set-up as do too many chefs spoil the soup.
There are some wonderful traders in my chat room of various levels from beginners to veterans who trade with aplomb. Sometimes it is hard for any one of us to draw the line between ego and confidence. We are emotional beings and we need a set of constructive rules to help us stay the course and sometimes we need the gentle support of a fellow trader to help us keep the emotions out of our trades.
We all blurt things out that may not be constructive sometimes. I am guilty of doing this myself now and then but the rules help me to keep in line. I am very careful not to use words that attach emotions to trades. Words like "fear" and "anger" are two that I believe do not belong in the same context of a trade. Psychologically, just putting those words in the same sentence with your trade will attach those emotions to it.
I also make an effort not to knock down a trade that a trader has just made. When a trader asks me about a ticker in the context of considering a trade, I happily give my two cents, but when a trader states that he has already made a trade, I try to look at his position constructively rather than knock him down the way "Bill" did with me. I don't see the point. After all, he is not going to get out of the position he just entered into. This could become a nightmare of overtrading and serves no purpose. If the trader had a reason for entering the trade, say at a support level that may not be an entry that jives with my strategy, I hold off making comments until I can be constructive in a way that is helpful.
And so I say to all of you retail traders, young and old, newbie and veteran, be supportive of one another. Share your wisdom and experience if you have it but stay constructive. And for those of you who are newer to the game, remember that the best traders are only right about half the time. Those are the statistics. Look for a mentor who can give you a strategy for keeping the odds in your favor and don't send hateful messages when they get a stock pick wrong. Every trader gets stock picks wrong. What makes a trader great is his ability to be profitable over time. It serves no purpose to try to knock another good trader down. And for those of you who are tired of being insulted, stop rewarding those who insult you. It will not help you to continue to pay them. I am sad to say that I was inspired to write this essay because I came across a post by "Bill today. "Bill" has taken to blogging on one of the trading guru sites, and the theme of his game remains the same. He insults his readers for not being as good as he is. Poor Bill!
For more on Dr. Doug Hirshhorn, check out his site at http://drdoug.com/
And check out the FREE trial to my chat room HERE.
...and she knows how to use them. Today's higher trading in AAPL will create a doji sandwich on the chart. As such, the Nasdaq index is set to push higher after putting in a Left/Right combo off the 8 ema yesterday. That is to say, the previous day's doji was followed by a bullish engulfing candle which will confirm the signal on higher trading today.
This is overall good for the market as a whole but I also note that good data this morning in jobs and GDP resulted in futures dipping due to those who fear the great "tapeer." But I digress, we will just have to see what investor sentiment is today as the market makers make their moves. But I suspect higher trading is in our sights with Santa enthusiasm ready to run into year's end. In the SPY and the IWM, I will be watching for price to get back above their respective 8 emas and I note that IWM bounced off its trend line while SPY managed to hold the 21 sma.
Here are the charts for indices as well as some others I am watching.
Seriously people, these "Taper Tantrums" are getting old. Not that I mind a market that is pulling back but when I see futures start to dive because of a decent non-farm payroll report, I have to wonder what TWO-year olds are making those numbers.
Pull your panties out of their bunch.
Then consider for a moment that markets ebb and flow. Nothing moves in a straight line and a pull back after a strong run is healthy and allows stocks to grow again. So causing this confusion doesn't help anyone at all. Stop, Breath, Think...then act.
Spy has not falling off a cliff here and there are several layers of support to hold it up. This is not to say that it cannot continue down further, it can. And it would not hurt us if it did. In fact it would make for an easier market to get on board to new highs. The reason we are seeing this chop now is because markets have become a bit over extended.
Currently SPY has held the 21 sma which is sitting at 178.75. Below this is the prior resistance/breakout level from the high of 11/7 of 177.64. Previous resistance becomes support and I will be watching those levels. I have both long and short tickers on watch and will get those out shortly. Here is the SPY chart:
Check out the free trial to our chat room here. Prices will go up in 2014.
We are seeing some profit taking as we come into the last day of the second sub Small Cap Power Period. But I see no cause for alarm in a market that is pulling back to consolidate recent all time highs.
Futures are down this morning but investors are still positive and may very well buy the dip. As SPY and other indices test their respective 8 ema's following shooting star type candles on Friday, it is impossible to know at this point if a deeper correction will ensue. Currently, up-trends are still in tact and my internal market timer is still green but recent action denotes caution. I will not add to positions unless I feel confident that the timer will remain green into the end of the day. Here are some charts I am watching.
Markets continue to be bullish as we come into the last two days of the second sub Small Cap Power Period of 2013. IWM has continued its breakout albeit a bit of profit taking on Black Friday. Certain retailers fared better than others over the biggest shopping weekend of the year. AEO and GPS were hot with foot traffic while ANF and ARO struggled to bring in shoppers. It will be interesting to see how today's online shopping extravaganza numbers turn out. Here is the IWM chart followed a few others I am watching.
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Bulls proved they are still in charge of this tape yesterday with the strong moves in the indices. IWM continues to be strong as the Small Cap Power Period surges on and the Thanksgiving turkey gods shine on the markets.
My focus is not on the markets today as I will be leaving early to drive to New York with my family. Also, I am fretting over the stuffing I made last night. I spent hours chopping and dicing fresh herbs and vegetables...put in a lot of special ingredients, cooked it and asked my husband to put it in the fridge after it cooled. He forgot and it stayed out all night. It's in the fridge now but I am wondering if I have to throw it away and I am feeling rather emotional about the whole ordeal. Three pans of stuffing! Sigh...
Since I need to pack and since my mind is elsewhere, I will likely just place hard stops on current positions and leave it at that. I will be in the chat room this morning for the first hour or two, so feel free to drop by and I wish you all a very Happy Thanksgiving!