Pay attention to the leaders and the losers

I've stressed many times in the past to follow the market leader i.e. the sector that is leading the strength (or weakness) of the overall market. In the bear market it was wise to follow the banking index which led the way to the downside. During this bull market tech has been the leader and so it pays to follow it. During the past 12 months whenever the NASDAQ has made a new 52 week high it wasn't too long before the lagging SPX and DOW followed suit. The equally weighted SPX has actually in fact made a new 52 week high along with key sectors such as the consumer discretionary and retail. Small and mid cap sectors have also made new 52 week highs. The fact that the growth sensitive smaller caps have been outpacing large caps is also another healthy sign for the market longer term. I still think we are in a sideways type consolidation phase here for the overall market as measured by the SPX with the possibility for marginal new 52 highs but I suspect every last bear is going to get squeezed before we see any kind of meaningful dip and that probably entails a move above 1150. That's my best guess.

I've mentioned before that there's a lot of ways to study the market but that only few ways are effective. One very unusual but effective method I have is to keep tabs of what the losers are thinking. By losers I'm referring to message board and blog posters who have been atrocious at calling the market and display traits of an amateur. I have a folder in my favorites tab labeled "losers" which tracks these posters. I currently have 6 people in my loser folder. The top 2 are my "all star losers". One of them has freely admitted to having blown his entire $300K IRA with his trades and is now down to his last $500!!!! In the past 6 months he has literally been on the wrong side of over 90% of his trades. Never have I seen such an impulsive, undisciplined trader in my life. He has got to be the world’s worst trader....and I'm not even exaggerating! The other all star loser has openly claimed to have stopped trading since November 2008 and yet he posts at least 20 messages a day of nonstop doom and gloom. He's in his 40's and lives alone probably never been married or laid for that matter. To be bearish LT would be to be in agreement with this pathetic loser, therefore you must fade this idiot no if ands or buts.

My theory is this...you can analyze charts and indicators to death but since losers will by definition lose you can win by doing or thinking the opposite of what they do! Seems too simplistic doesn't it? But it works!