Less is more

I don't want to comment too much on the day to day action because quite frankly, it's not relevant to my style of investing/trading. In bull markets I trade a lot less than in bear markets because that's the best strategy. I won't lie though....if I strongly sense that the market is vulnerable to a major setback or consolidation I will pull the trigger on certain long positions that I think could be exposed and that's what I've been doing. I also did this in the spring and basically twiddled my thumbs the entire summer. During these past couple of weeks I have been raising quite a bit of cash. I just got rid of the one dog stock I had mal.to at a modest loss and I have partially cashed in on stocks that have made great runs such as psv.to and tec.to. I bought them about 2.5 months ago. I might regret doing so given that they are still holding up very well but I felt over exposed given my market outlook and it's easy for these rather illiquid stocks to go down quite quickly. I still haven't sold any wzl.to and isc.v. wzl.to just recently made its breakout and did so on a day when the market tanked big. isc.v is very undervalued and is consolidating very nicely here. You can just smell a breakout coming. They report earnings on the 29th. All of these stocks are basically in the same sector benefiting from the general rebound in drilling activity for oil and gas and new growth opportunities such as the Bakken and Marcellus shale.


When it comes to the markets the mistake most people make is that they over-trade. Most trading blogs obsess about and try to predict the day to day movements of the market. I'd be willing to bet that at least 85% of the people who do so lose money in the long run. It's just too random. It also makes you myopic and slow to identify when a change in the long term trend may have occurred. Take for example my daughter. I see her every day 12 hours a day and so it's hard for me to notice her change. My parents on the other hand see her 1-2 times a week and they always notice her changes.

Take a look at any yearly chart and you will see that you would only have to have made 2-5 moves the whole year to be hugely successful. The majority of the times you would be watching the market doing nothing either in cash or fully invested. Jesse Livermore was correct when he said the most important part of investing/speculating is the sitting....that is, being right and sitting tight or sitting tight waiting for opportunity when the risk/reward is heavily skewed towards a certain outcome before committing. It can be very difficult to just sit there and take no action for long periods of time when you do this for a living. It's very tempting to touch something similar to the urges of a male teacher at an all girls high school. More often than not, when I tried making something out of nothing i.e. forced a trade I regretted it. When I dabbled in a day trade I regretted it more often than not. When I focused too much on indicators such as stochastics, MACD and RSI I regretted it more often than not. My successes came from focusing on the larger moves ignoring the day to day minutia. I know I am guilty of commenting on it at times but I do it for entertainment purposes only!

As of now the market still has work to do before the same indicators and anecdotes which warned me about the correction give the green light for the bulls again. Yesterday's bounce looked a lot like a dead cat one. There's chatter out there about how we are in a strong seasonal period from now until the end of the year. That is indeed true and this strong seasonal period is one of the very few I find worth paying attention to when a bull market is on but in my book, my market indicators which are based on sentiment, always overrule any seasonal shit and right now the indicators still suggest vulnerability for the bulls even though bounces and sucker rallies could still occur.