I've been re-reading my favorite stock market book Reminiscences of a Stock Operator for the 3rd time. Every time I have re-read it, it inspires me and I learn something new. It also makes me realize more and more how some things never change. Livermore described what he coined "the semi-sucker". According to him, the semi-sucker is one who is not totally green in the market and has an average life of about 3 years on Wall Street before he quits or goes broke. The semi-sucker has some experience and has read books about the market (from a group of higher level suckers). He won't make the pure rookie mistakes but he still ends up a loser nonetheless. Livermore said one of the things semi-suckers love to do is buy stocks that have had a big decline from their high (or on the flip side short stocks that have a good run). The semi-sucker thinks he's being smart buying stocks at such "bargains". But quite often he gets run over because the stock went down big for a good reason. I saw a perfect example of this when my friend told me how his father-in-law bought RIG at $75 this summer on the dip. Semi-suckers come in all forms. I see tons of them out there. Here's a perfect example
I am a small investor / short term trader in SPY and GDX. I mainly use hourly moving average, trading volume, chart patterns, and Elliott waves. I find I don't have time to read up on fundamentals so TA suits me just fine. I am retired military and trading is my second hobby - after photography
This guy's profile is just screaming " I'm a sucker take all my money now!" Elliot waves?....trading as a hobby?...no wait....a second hobby? lol! This guy needs to find a less expensive hobby. First of all Elliot waves is a big crock of shit. This is not debatable and I'm not going to waste any more internet space to explain why. Second of all if you trade as a hobby or even worse a second hobby you are very likely going to lose money in the long run. You have to treat trading as a business if you want any chance of being successful.
Livermore was a speculator not an investor. Many of his principles are the foundation of what I believe is a successful speculator. Aside from treating speculating as a business, an important foundation principle is to have no allegiance to either the bear or bull side. The only allegiance you should have is to the right side. You should be just as comfortable being a bull as being a bear. Another basic principle is that you must conquer your own worst enemy....yourself. This means emotions, in particular, fear, greed, hope, impulses and pride.
These are just foundation principles. The realities/tendencies of the market and strategies you should use are another story. The vast majority of "traders" and market pundits I see out there aren't even close to mastering these basic foundation principles. They are either miserable, biased, dogmatic, bitter, and emotional or a combination of the above. This makes them perpetual semi-suckers. I don't mean to sound like some sort of condescending jerk..I know I'm far from perfect and I paid my "tuition" but I know I'm better than most of the clowns and pundits out there but that's not really saying much...to be great requires one to be leaps and bounds above the rest for a long period of time and I haven't proven that yet.
As far as this breakout goes I still don't get the sense of complete capitulation from the bears and full embracement from the bulls. Hard evidence of this can be seen with rydex traders who continue to still stubbornly refuse to buy into this rally. I figured the breakout would have caused at least a little bit of chasing from these clowns but it did very little. After repeated whipsaws this summer it seems that potential longs may want to see this "breakout" hold for a while before having confidence in it and/or want to buy on dips. I said this before, the trap door will not be sprung until Mr. Market has shaken out most of the weak bears and sucked in most of the weak longs and he will do whatever it takes to do so.
The market got quite ST overbought after yesterday's move and so it won't be surprising to see some down/flat action for at least a day or 2. Keep in mind that a market that makes a new rally high closing near the HOD indicates that there's likely more upside ultimately to come even if a rest follows. Think about a boxer who is getting the crap beat out of him the whole round and then finally gets knocked down but is saved by the bell. If it wasn't for the bell things probably would have been worse. It's the same idea when it comes to a market making a fresh new low or high and closing near those levels. Top/bottom picking under such conditions is always a dangerous game. If you do so better be nimble.
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