1. Going to try a thread here on some prior bottoms. Every one of these I lived & traded through so I'm NOT cherry picking past examples. I'll show where the low/FTD happened but more importantly where the really good opportunity to get aggressive on the long side appeared.
Ok time for a word of encouragement & personal story for all of you out there who've been a bit banged up over the past year or to anyone thinking about quitting. Early on in my first year on my own in market I was down. Down on money, down on confidence and down on strategy...
General Market Thread...
1. For starters the Nasdaq is oversold in the short term. What is most interesting to me eye is volume over the past 3-4 weeks, all below average while the market has slid lower.
I dusted myself off, got back to work and stuck with it and haven't looked back since. I've kept a copy of this in my desk ever since and I read it often remembering that time. My sense is there is someone out there reading this who needs it as badly as I did then.
If you haven't felt stupid then you aren't managing risk. I've stopped out of lots of trades right on or near the lows and taken profits only to watch prices go WAY higher without me. Consistent application of discipline doesn't take 'feelings' into account.
Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with great talent...Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.
-Calvin Coolidge
To me the 50-day moving average for the general market is like the curfew your mother used to give you. The saying was 'nothing good ever happens after midnight' (or whatever your curfew happened to be). Study this and you'll see nothing good happens when we're below the 50day
Make no mistake this is a very tough market. The last 5-6 months have been a grind and I'm actually down a tiny bit on the year (never a good feeling). Liquidity is poor, volatility is high and a LOT of two way action. Have been small/defensive and staying that way for now...
Ok sports fans this is a BIG step in the right direction. Classic 10-day adv/decl breadth thrust triggered. Last one per our work was Apr 6th of 2020, we all know what happened next but this has a very good track record.
I would say my list of potential ideas for this week was the lowest quality since the rally started back in November. Just because you have money or want to spend it doesn't mean you should. Markets are no different. Patience pays.
I must say the price action in breakout type trading was the best I've seen all year. As always taking things one trade/day/week at a time but this week was either a BIG headfake or potential character change. As always staying flexible with my eyes/mind open.
I know a lot of folks saying this rally is just like the others over the past year...this chart says otherwise. Again new highs/lows aren't something I grabbed to support my view they are a part of the process and telling me valuable info, i.e. that this rally is different
Wow...wasn't expecting that many guesses. After skimming/commenting on a few I don't believe anyone guessed the right one which tells me it really is still a hidden gem...
When David Ryan talks, I shut up and listen...not saying he's right but watching closely to see how the market responds to today's reversal and if we get distribution in the subsequent days etc.
The rally from 6/17 looks to be nearing the end. Today the market moved into 9 months of overhead supply and just above the the last rally high at S&P 500 4117. The reversal from the early morning strength is negative. Take profits and raise cash.
A phenomenal time at the first MPA Gala Event! Really appreciated so many of the kind and encouraging words from the members. It was humbling and I had a blast connecting with everyone. These guys were pretty awesome too!!
Today would qualify as a follow through day should we hold and close on higher volume than yesterday. I'm not seeing many stock ideas, but I will buy something should this turn out to be a valid accumulation day. This is where rules override my feelings or gut. Stay tuned...
Ok a few threads observations before a long holiday weekend. Let's start with the stock market. I started the week pointing out the valid FTD and tested the waters. Action was so/so but net positive however some positive changes of character to point out...
So I've never been a big believer in seasonality. I am a HUGE believer in studying your own trading/results. So I ran this study of all of my monthly results added up numerically (all Jan summed, all Feb summed, pls no math questions) what month would you tilt more cautious?..
Weekend work showed fewest ideas in probably 6 or so months. I used to get annoyed by these type of environments where now I welcome it. We live in a day where everyone wants instant gratification and if it requires patience most take a pass. I'm happy to fade the impatient.
I often view volatility as a symptom of the market...the higher the less healthy. 1000 pt swings in the Dow in less than a minute following CPI...not ideal/healthy. Again I'm not a vol trader and I use directional stops cause I want to survive so there's that too...
Starting to wonder if a breakout in the IWM/Russell 2K may be the best contrarian buy I've seen in a LONG time. A few thoughts on this but may get a bit long winded.
I've found that whenever you can do something that others can't, you have an advantage. In sports and other endeavors its obvious bigger, faster, stronger etc. In markets process & patience are often those intangibles that provide a real advantage.
For the bulls a pullback here could be very constructive if the market can avoid distribution and the market is orderly for 1-2 days while we see more subsequent pivot points in individual stocks. Here is where you really watch how individual names act closely.
In today's Q&A session
@markminervini
stated that 'when opportunity intersects with your preparation' is when the really spectacular results occur. The more I've thought about this the truer it has been in my own story. Many have the opportunity but are unprepared...
Quick market update here as we're pulling back. I would love to see something like one of these scenarios play out where say in the Russell we can hold the 50-day and digest. IF (again big IF) this happens we should see a LOT of pivots/setups start to come out of the woodwork
Holy smokes some serious earnings blood letting going on today...$FNKO, $SRTS, $TEAM, $CVNA, $TWLO. All of these down -30-50% in one day! Again risk in stocks is real. Also shows that environment matters. Bear market + poor liquidity + earnings miss = lookout below!!
Hey twitter friends:
Just wanted to say many thanks for the overwhelming kinds words/comments from this mornings thread. Quite humbling to be honest but tells me there is a real hunger out there for more truth & transparency. If true, much more is on the way.
Ok time for a word of encouragement & personal story for all of you out there who've been a bit banged up over the past year or to anyone thinking about quitting. Early on in my first year on my own in market I was down. Down on money, down on confidence and down on strategy...
Friday was a valid FTD. Whenever we have one of these my process requires that I buy something. Yes I'm skeptical, but I don't stick to the process just when I feel like it I do it EVERY time. All bull market starts with one in the early going so I ALWAYS dip a toe.
Definitely distribution starting to cluster a bit on the Nasdaq as well as other indices. Right now likely normal but I raised some cash this week both via profit & loss taking as I bend with the market. Likely more digestion ahead, but I wouldn't get too bearish just yet.
The Dow has definitely been the leader and getting quite 'V-Shaped' here. I've talked about how the 200-day historically keeps the lid on bear market rallies and here is where I'm watching to see if we get a change in character. Does it reverse hard or pullback orderly??
I've read a lot of books on trading/speculation over the past 15 years. Most of the time I don't read many 'new' books on trading but reread some of my favs. One in particular to me gets the 'cult classic' award for most underrated trading book of all time. Any Guesses??
The last 12 months for me has really been reinforcing the value and skill of being able to do this...my co-portfolio mgr told me this week that we've done the least amount of trades EVER in 2022. In my view EVERY good strategy should have times of lower activity/opportunity.
Anatomy of a loser...$MU stopped out of this earlier today. Many would say 'oh that was a bad trade' because it was a loser. I will take this trade 100 times out of a 100. A trade/investments outcome should not be confused with whether it was a good trade.
A great time to explain how I managed this & why as I was planning more comments on this stock from a few perspectives...first of all here are my entries for this name as I've been trading around a position for a few months and talking about how this was the clear liquid leader..
@MarkRitchie_II
I know you were holding part of a position. Did you sell any into this? I took some off on the 19th and 23rd. I also sold some yesterday and into today's rally. I will follow the 8-week rule with the rest. How did you manage it?
One thing I like to do on ugly opens is to see what names (if any) on my watchlist(s) are green or can go green first. A stocks ability to buck the weight of the general market means it's likely under accumulation.
Finishing up the last run (for now) in -10 below weather while listening to some worship music turned from misery to joy in about 5-10 minutes. Made me wonder how often we quit to early??
Ok trying something new here...going to throw out my thesis/process for how I'm handling BTC/$IBIT from here and why I'm playing it for a bigger move. I get asked quite often 'how do you know what to play for a bigger move'? Here's my thoughts around BTC currently...
The bears currently have EVERYTHING they need to push the market lower. Aggressive FED, potential recession, disaster in Europe/energy prices, higher USD and surprise hotter CPI. How low can they push this market?...
Listening to a crypto mgr talk about how their fund lost -80% last year, but so far in Jan they are up +40%. Hey we made half our losses back right?? Wrong. It takes roughly 400% gains to bring an -80% drawdown back to even. Controlling drawdowns/downside volatility is key!
I'm a big believer in knowing what you want to see. This is what I'd love to see the Nasdaq do from here. Will it grow into this perfectly, prob not but a consolidation that avoids distribution while we see breadth widen and MORE stocks setting up will get me aggressive.
I'm wrong on MORE than 1/2 my trades/ideas. This is SO classic and everyone should read 'Marty Schwartz' book and interview in original MW. Who cares if you are wrong or have to take a loss? Get rid of the ego and focus on compounding good risk v reward decisions.
I am wrong on about half of my trades
I am amused by how the wannabes on X call others out for being wrong
Over-concern/fear of being wrong is the worst friend a trader can have
I view small losing trades as part of the process of finding discovering large winners
You?
Ok another great question that is both important and personal, however I'm happy to share as I'm a big believer in 'counting the cost' of things and I'm not just talking money in this case prior to undertaking a significant life change...
Hello,
@MarkRitchie_II
went through both threads.
would really appreciate it if you can reply to the below question.
How did you financially get through a period of having no income and two kids and a wife?
Adding... Did anyone support you with money?
So a couple names to watch $CELH, $CLFD, $ENPH. All high RS with big earnings & sales that have ripped since the June lows. They are NOT setup however IF (big IF) this market is bottoming these are potential key leaders and should be bought if they can setup low risk entries.
Ok a couple of scenarios to watch for here in terms of the general market as well as stocks under the hood.
#1
. Can we stay tight and continue to digest and round out a 'right hand side' in the general market? If so this should setup a lot of handles & pivots single names...
Yesterday was a 23:1 upvol/dvol day on NYSE. This is BIG. This is the equivalent of stomping on the gas pedal until the RPM starts to redline. It is the biggest one day thrust we've had per our works since 12/28/13.
Don't confuse eloquence with the ability to make $!! Just because someone sounds smart doesn't mean they can manage risk or make $...present company included. Again apply this as you wish but it's always stuck with me
True story so I get a hedge fund mgr friend send me a detailed report on this company last week and ALL the fundies look stellar etc. Earnings come in triple digit and stock loses -50% of it's value in one day!! Environment matters and where we are in the cycle is huge.
'I have observed that the principle power of a bull market is purely money, the availability of money...'
-Jesse Livermore 'How to Trade in Stocks' printed 1940
Time for a rant/story...for those who don't know aren't aware I come from a family of occasional ranters and occasionally I have to go on one, so if that's not your thing then skip this thread altogether...
Patience is what separates the smart from the truly wise. Smart people know a lot of stuff but the wise have their knowledge wedded to proper timing.
-(bored trader attempting to be patient)
For the tactical position trader less has been more in 2022. Done the least amount of trading in my career in terms of # of trades as well as relative sizing and wishing I'd done even less. Risks still elevated and the tape is still very challenging.
Hand raised...
Overbought...sure but that's a sign of health in a new bull advance.
Overvalued...valuation metrics are the worst timing tools in the history of the stock market imho.
Bubble...S&P 500 just made a new all time high after a 2 yr bear market, no bubble just a bull
The two things that will impact you (especially your thoughts) the most...what you read & who you surround yourself with. I'm amazed at the number of people who don't like where 'they are' and yet don't see the link to the company they keep and what they feed their mind(s).
A number of the indices have this pattern where they've been grinding near highs but more net distribution than accumulation. This breaks I think a test of the 50-day is in the cards. Would be normal and I'd LOVE to see a lot of put buying and a pickup in bearish sentiment.
'Gradually, then suddenly' is a quote supposedly from Hemingway on how he wen't broke. It's quoted differently 'slowly then all at once' etc. However it's often an accurate description of a LOT of things in life & markets, and is often a doubled edged sword it would seem...
I have this old photo from the 70s of my father & uncle trading on the CBOT floor framed on the wall in my office. It reminds me of my roots and where this all started. If it weren't for my uncle Joe I probably wouldn't be in the business at all. Thankful for his influence.
Essentially what the Russell 2K is doing to all the bears/shorts who got way over their skis. The good news is breadth is going to massively improve and this likely leads to a wave of good buyable ideas rather than just the Mag 7. Stay tuned.
Ok this is a great question and worthy of some comments. For starters let me be very clear on one point. The measure of a good trade is NOT the result. Just because you made or lost $ doesn't mean it was a good/bad play etc.
I think it was O'Neil that said 'sometimes the best stock to buy is the one you already own.' I heard it from
@markminervini
but this is exactly what I'm looking to do right now if indexes can mark time while a few names I own can hold and set subsequent pivots...
Bit of general market commentary into the weekend. First off is that todays anemic bounce isn't surprising and I'm old school in that if we see a pickup in selling towards the end of the day/week increases the odds we have more to go next week, so watch the close and volume...
Someone sent me this over the weekend and I've read just about everything in print I'm aware of about PTJ and this was a great summary/amalgamation of what's made him successful. Should be essential reading for ANY trader or investor imo.
Most market players who lose think it's because they don't have good enough ideas/research. I've found that most folks ideas are actually pretty good, it's their tactics that are sloppy/lousy.
We've been talking about this for years at MPA. Many naively think that volatility is good for directional trading and that is because they don't understand the difference between volatility & alpha. Volatility is two directional movement, where alpha is excess return...
Like during previous rallies, volatility has come down, but not yet to levels associated with sustainable uptrends. Looking back at the 2003 bottom, it wasn't until the VIX broke out of it's range to the downside before we experienced a new bull market from an effective bottom.
Market Commentary & some past precedents (all of which I traded) to give some color.
I must say the strength of the rally is surprising but VERY encouraging in the intermediate term for equity prices. I've gotten longer but not overly aggressive yet...
If this is indeed the end of the FAANG dominance this is GOOD NEWS!! If you are interested in outperformance and alpha this means there are new leaders on the way and great opportunity when this $ rotates out over time.
$META is playing out as I expected 👇and rhyming with history. When a secular leader finally tops, the average decline is about 70%. $META is now down 75% off the highs falling right in line with my 50/80 Rule.
'Diversification is a concept that brokers came up with to cover themselves...if you want to get wealthy you need to have all your eggs in one basket, pick the right basket and watch it closely'
-Jim Rodgers (this morning on
@RealVision
)
still brilliant
Talking to Larry Hite in the lounge last night. The man is a fountain of wisdom and great stories.
'No one goes into their first boxing match and is surprised when they get hit in the head, yet people are shocked when they first get into the markets and get whacked.'
I'd say the news at least is starting to build a pretty decent 'wall of worry'. Inflation, rates, potential recession, wars and conflict, political dysfunction. Not a reason to buy but this is the stuff bottoms are eventually made of.
Kudos to
@Beth_Kindig
as she's NAILED this $NVDA move. It was her call on
@RealVision
back in Jan 2023 that got the stock on my radar when she said 'NVDA will own the AI space.' Stock has gone up more than 5x since despite every value bear you can find cursing & shorting...
Now is a really good time to focus on price action. Seeing some signs of potential character change in some stocks but we've had some false dawns in the past. I want to see if we can get breadth improvement and follow through from here.
Yesterday was a valid accumulation day with decent breadth. The question is do we run into immediate selling/distribution? This market is still oversold and has room to run. This is where you have to buy something and start testing the waters if you haven't already.
Thought it might be helpful to highlight some times when consensus had gotten it dead wrong over the past decade. Highlights why I try and always keep an open mind and be ready to go against the crowd. 2010, 2017, 2020, 2021 (in reverse from lower right/upper left)
Distribution day on Nasdaq yesterday is first negative shot back across the bow. However Dow leading the selling yesterday is actually a good sign IF the pullback is shallow and we find support. If distribution widens and we see more selling bears are back in control.
I often tell my kids when you don't know something...'just ask'. Fools pretend they know things they don't while the wise readily admit what they don't know...which brings me to today. My co-portfolio mgr & I were talking and he asked 'what do you think the FED does today?'
I'm gonna make this whole Credit Suisse discussion really simple from where I sit. Would you hold assets at a bank whose chart looked like this? When a stock trades below 5$ it's a MAJOR red flag and I don't care how long the company has been around...
Ok gang going to be engaging a bit more on twitter going forward and changing the handle/look a bit. We are no longer bound by certain restrictions on what we can/can't comment on so will be doing a bit more engaging via twitter on what we are seeing in the markets.
I keep what I called the '5 capitals' in mind regularly.
-Spiritual capital
-Relational capital
-Physical capital
-Intellectual capital
-Financial capital
How am I stewarding these areas and if I'm not making gains currently in one capital am I growing in another?...
The key is to protect capital and only get incrementally more aggressive on the heels of success. I've had periods where my account has gone no where for 12+ months and done a lot of trading/jockeying for very little net progress but the goal is to not dig a big hole.
@MarkRitchie_II
Hi Mark, thanks for sharing. Can u also pls share ur thoughts/wisdom for us newbies who are going through a bear market for the first time and feel like there isn’t as many buying opportunities & strong follow throughs ? It does “get” to our mindset. Tq 🙏
Perspective...yes the market is snapping back hard and we're not even back to the 50-day. No need to be in a huge rush or chasing stuff right now. I really liked the breadth in this thrust which at least speaks to the fact that there's some power behind this...
Important teaching note. Make a habit of knowing what you'd like to see ahead of time. Most of the time it won't happen but when it does it should be a flashing light on your dashboard telling you to get MORE aggressive!
Quick market update here as we're pulling back. I would love to see something like one of these scenarios play out where say in the Russell we can hold the 50-day and digest. IF (again big IF) this happens we should see a LOT of pivots/setups start to come out of the woodwork
Market Update.
I'm liking the action in equities thus far 3% pullback is all the Nasdaq has been able to give. The real question is how many are still locked out? I'd like to see more time but markets don't care what I want and I've gotten some traction so looks good...
This is really BAD action. The market just wiped out all of the gains since the FED announcement and round tripped +7% (up +3.5 then -3.5) in a few hours of trading. Liquidity is very poor which means bigger swings both directions, but for the bulls this doesn't look good.
When everyone and their brother is watching & waiting for the CPI print you know we've been in living in 'bizarro world.' There will be a day when this becomes the data point most people yawn over, in the meantime make sure your tray table is up and seatbelt buckled...
8. Last point is DON"T GET TOO BEARISH. I may be cautious in the near term but this is going to setup an incredible opportunity when this storm passes. I can promise you I won't time or call the bottom perfectly, but I will be there to take advantage after this baby turns.
Today has the making of all things UGLY...if we close on the dead lows and volume swells I think you're looking at a possible weekend route whereby Monday is also nasty etc. It's very early but something I'm watching for albeit from the sidelines.
In my experience the best traders are NOT masters of diversification but concentration at the opportune times. The longer I've been doing this the truer the statement has become and something I am ALWAYS trying to improve upon.
Looks like we are getting some rotation back to small/mid caps. Something we've been wanting to see especially on the heels of AI related names ripping last week. We don't need small/mids to lead as much as remain a part of the rally as it shows increased appetite for risk.
The reality is everyone sees the NQ chart and thinks 'hey look at this great trend' and new bull market we have going. But if you haven't been in the few areas leading your actual trading has looked a lot more like the Russell 2K. Choppy/volatile and tough to press the trend.
The conclusion would be...if you can't be patient then you haven't fully matured. Again just one mans opinion but that was on my mind this morning as I was tempted to make a few less optimal trades that I passed on.
Happy Thanksgiving. Take time to focus on what your most thankful for. Tops on my list is this woman who’s helping me make my fav meat stuffing for tomorrow. I’ll post the recipe for anyone interested. If you don’t like it you didn’t make it right or we can’t be friends…
There is NO WAY this poll squares with reality. Most quit after a few months of tough sledding let alone years. I would argue 80-90% quit in years 1-2, then more by years 3-5. Those remaining will do well or really well...that would be my breakdown fwiw
Serious question for aspiring/novice market speculators:
If you knew in advance that your trading approach would make a little/lot, lose a little/lot, but basically break-even for five years...
...Then be very successful beyond 5 yrs,
Would you have the patience to pursue it??
7. Here is the current chart of $QQQ. Do we have a low? We have a failed accumulation attempt but the current low doesn't even have one yet. Draw your own conclusions but based on the prior examples no need to do much yet imo.
It's very early however based on the first 30min of action I'd say so far so encouraging where the stocks that have traded well are holding or in some cases going green. A reversal here would be a great sign for the bulls...stay tuned could be a volatile/long day...
1. We are already in a recession and now that everyone is waking up to it, it will be short lived and everyone will doubt the recovery thinking the worst is yet to come.
2. Or, we haven't started the real recession and the crowd doesn't understand how bad it could really get.
2. Been doing some writing of a more deeper/reflective nature on trading/life that I'm considering occasionally posting some samples on twitter and after last weeks 'Don't Quit' story curious if that is something anyone out there has any appetite for? Feel free to comment.