I love Mondays

I often see comments from my friends on facebook about how they hate Mondays. To them, the work week is like doing jail time and Friday couldn't come soon enough. I'm sure most people in the working world feel the same. Me, I love the work week especially Mondays because I'm looking forward to another 5 days of playing the stock market. Few people in this world get to do for a living what they really enjoy. I feel privileged in being able to do so...but never complacent. I know better than that and as I said last week don't expect authorities to get complacent either. Bernanke recently said that regulators are already looking into this mortgage "fraudclosure" issue very seriously.


As far as the market goes, sorry to sound like a broken record but I still see a lot of top watching. Bears are getting all excited about this "shooting star" formation in the chart just like they got excited about the death cross, head and shoulder pattern, Hindenburg omen and countless other bear traps. But I'm starting to notice the permabear ilk is turning sour towards Pretchter and Elliot waves. A contrary indicator you say? Perhaps in the short term but longer term I expect to see the retail ilk to one day despise permabears the same way the retail ilk of 2002 despised permabulls. Bears like Roubini and Whitney are still held in high regard even though they've been on the wrong side of this roaring bull run since March 2009. Back in 2000 bullish gurus like Abby Cohen were held in the same regard but she stayed bullish although the tech led bear market to the point where the retail ilk would ridicule her.

When we do get this "correction" I don't think it's going to be anything close to the flash crash simply because it is so anticipated. On a bigger picture view of things, conditions are still favorable for the bull market. Bull markets end and bear markets begin when optimism is high i.e. both "pro" and retail investors having been pouring money into the stock market and monetary conditions are tight. Neither of these 2 things is in place today. In fact, it's the opposite which suggests that pullbacks and corrections are all you can expect to see to the downside and higher highs ultimately lie ahead. I find it hard to believe that the bull market can end without any significant retail participation on the long side and when I see so many people losing big money on the short side anytime the market has a big run like this one.

It's important to keep the big picture in mind because big money is made riding big trends and it's so much easier making money going with the big trend then against it. In Reminiscences of a Stock Operator Livermore talked about a man he met at his brokerage house nick named "Partridge". He was an older man who wasn't very active in the market compared to the typical trader there. One day Partridge took a tip from another trader to buy a certain stock. The stock did well and then the tipster advised Partridge to sell so that he can buy back later on the pullback but he refused. He simply responded "well, this is a bull market you know!” The tipster didn't get it, he thought Partridge was crazy. Partridge told him "when you are as old as I am and you’ve been through as many booms and panics as I have, you’ll know that to lose your position is something nobody can afford". Partridge learned the importance of staying with the primary bullish trend not worrying about corrections because it's not worth trying to save a few dollars from timing a correction compared to the risk of losing out on big gains that the bull market will likely deliver. That sounds a lot like buy and hold doesn't it? It is and in bull markets that what you should do

This doesn't mean you should never trade in a bull market (there's often exceptions to rules) but...and I've said this before.....you will have hard time beating a buy and hold strategy in a bull market. Eventually you will trade yourself out of it and watch from the sidelines as prices soar without you. It seems to me though; that the problem a lot traders have had with this bull market is far larger than selling out of profitable longs too soon....they are seldom going long to begin with!