I mentioned how the market reminds me of March 2002 which afterwards led to a big multi-month decline. Let me be clear that conditions are still NOT ALL yet in place for this notion to be confirmed. Certain things are unfolding the same way but what we also need to see happen is the rydex ratio continue it's collapse, the VIX continue it's decent and bullish sentiment as per AAII show a significant spike to about 2:1 bulls vs. bears. Until these things occur it would be premature to make the comparison complete. If things unfold differently then I will toss this March 2002 replay idea into the garbage. No sweat off my back and no ego damage either. Rather than defend a wrong notion I had to "save face" like so many other blog writers do, I will just try to adapt to the conditions at hand. I have frequently revised my outlooks during the past few months…sometimes significantly so and so far I have been fortunate enough to be right more times than wrong.
It is very important to be flexible and keep and open mind about what the market is going to do. I find way too many traders are biased to one side of the market. Learn to let go. Understand and believe in the motto of this blog. No matter what your convictions are for the end game in the economy you have to realize that it could takes several months, years or even decades for it to come to fruition. The collapse of Rome didn't happen in 2 years....it took about a century.
If you trade according to your personal beliefs of what the economy should or will end up doing, you will get crushed unless you can find the patience and the means to buy and hold the position for a long, long time. And what if you end up being wrong? What a colossal waste of time and money that would be. Ask Robert Prechter who after 1987 crash called for the 2nd depression. This is why I focus more on shorter term time frames....not necessarily day trading mind you.....IMO, most people shouldn't be day trading because it can often be just like gambling on a roulette wheel.
Understand and believe in the motto of this blog. Save your personal opinions and biases to coffee shop conversations. Find out what other people are thinking. If you realize that a lot of market participants share the same view as you that means that either a) the trend is old, is well priced in to the market already and a long term reversal is immanent or b) the market will likely begin a significant move in the opposite direction to shake out the weak holders and johnny-come-latelys before resuming course.
Once you don't care which way the market goes so long as you are on the right side of it then you are in much better frame of mind to make money. You will be able to assess conditions more objectively and realize much quicker when you are wrong. A lot of traders vow to act on this notion but they can't because they can't completely ignore their deep rooted biases.
I can almost guarantee you that over 90% of any bearish retail investor who posts on message boards or blogs have lost money over the past 12 months even though the market is still significantly down from 12 months ago. They likely closed out bearish bets too soon during the collapse and entered them too early since the rally started in March...and probably entered large bets too given the false sense of confidence they gained when they made money during the collapse.
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