Monday, May 21, 2012

Stop Thinking: Keep Planning

If you ever see a tweet that starts "I think... "

Just stop reading.

"I think this rally will continue... "
"I think AAPL is a buy down here... "
"I think I saw a puddy-tat... "

Does it matter what you think?
Does the market care what you think?

(answer:  no, and hell, no)

What we should be starting our sentences with is the following phrase:

"If [x] happens, I will [do something]"

This popped into my head and I must say, I don't think I can remember the last time I read a tweet like that.

If stocks gap up in the morning, what would you do?
If there is negative data from Germany tomorrow and stocks gap down, then what do you do?

We just had the best day of the year for the Nasdaq composite and what I've often observed after big up days is a "Z" day where the market will tend to zig-zag at least twice during the day.    up-down-up or maybe down-up-down.

So for example, if  /tf hits 764 tomorrow and I see several Market Signals showing problems... I will look to short 764, especially if a 3-bump pattern develops there.

If TLT falls off a cliff as it broke below its 15 min. chart on Monday, I will add to an initial TBT purchase.

Let's face it, the last year or so has been dominated by headlines, mostly emanating from Europe.  There's no point in thinking at all.  If Greece defaults, it's a shitstorm.  If Ben starts QEIII, we gap up 4 billion points. 

CNBC and other media have to try to explain every day why things happened and they will continue to predict and predict what happens next. 

We don't know what's going to happen next.  We do know that all traders are humans.  Yes, most trading is done by robots but the humans still control the robots.  And therefore, the market will always continue to ebb and flow, overshoot and undershoot and continue to repeat patterns based on human psychology for a long long time. 

Our job is to master our own emotions and play just ahead of the crowd.  Get ahead of that and you turn into a value investor.  Get too far ahead and you're a deep value investor. 

But that's just what I think.

No comments: