This Week’s Battle Plan
“One
of us is crazy and it certainly is not you.”
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—Larry Fine to
Moe Howard, Three Stooges
And yes, if you looked at the market Friday afternoon, you could
easily tell something was not exactly normal over the past four days.
Down 160 points Tuesday, up almost 200 Wednesday, down over 100 points
on Thursday, and why break the pattern…up over 130 on Friday. Four
consecutive days in the triple-digit range and the market ends up a
whopping 65 points from where it started the week. And yes, it’s
looking you right in the eye this weekend and saying “One of us
is crazy and it certainly is not you!”
“Less
is more”
        —Zen
Proverb
So where does that leave us at the start of this week? In my opinion,
nowhere. There is no short-term trend, there is no major edge in the
VIX, there might be a quadruple bottom in the
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) but the
techs are the weakest industry — see the past week weakest
RS list. And when you have a guy like Haggerty, who has
successfully traded through just about every market imaginable over
the past 30 years telling you “don’t take full positions on the
first trade, it’s much too choppy,” you know that maybe it makes
sense to take a step back for a few days. Wait for a trend to develop,
wait for some leadership, wait for the VIX to move away from its 10-
and 20-day moving average. And most importantly, wait for the market
to tell you where it is going…because at least for today, it is not.
But it will. And it likely will very soon. Until it does, though,
“less is more.”
“The
good, if brief, twice good”
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—Baltasar Gracian, 17th century philosopher
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                      Â
“A Pocket Mirror for Heroes”
I agree with this quote. But I must take the concept from above and go
one step further. It is human nature to force issues. Even the best do
it. We see it in professional sports every day. The quarterback who
forces a pass even when his receivers are not open, the basketball
player who forces a shot when it’s not there — we see it played out
all the time. And it is also done in trading every day. Most traders
(even the best) look for reasons to buy or sell a market even when
they know deep down there is no edge. They look to make something from
nothing. Again, it’s human nature. You’re supposed to be trading, so
you trade. The highest level of mastery in trading is to go against
human nature and do the opposite of everyone else. The best
traders, just like the best athletes, know when to pick their spots. A
part of trading mastery to do nothing when there is no edge to the
day. The past four days action is telling us there is no edge to the
market early this week. But that will likely quickly change. But
better to wait for it to happen first.
“My
desire isn’t to make money. I have more money than I know what to do
with. My desire is to win. And win forever.“
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                                                 Â
—Bill Gross, Pimco
Bill Gross oversees $350 billion of bonds for Pimco. He is the single
biggest force in the bond markets wordwide. He is brilliant, posessed
(he referred to Peter Lynch’s early retirement when he was at the top
of his game as a “chicken-shit way out”), and is likely the
greatest bond trader to ever play this game. If you get a chance, go
out and pick up the March 11 issue of Fortune magazine. The article on
Gross, “The Bond King,” is fascinating. Another way
to look at trading mastery.
“I’ve
known the guy for years and I’m still not sure of 60% of what he’s
saying”
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                                                   Â
—Larry Connors
I’ve repeated the above many times. And the person I’m referring to is
Kevin Haggerty. He remains the single smartest guy I’ve met in my 20
years in this business. Not book smart. Not math smart (I’ve met
smarter on these fronts). Trading smart. Real world, trading battle
smart. His analysis is a bit quicker than most traders, and his
knowledge is a bit deeper. If you get a chance this Tuesday, attend
the live seminar he and I will be doing teaching members how to use
our TradersWire
Interactive. Kevin and I created the TradersWire 2 1/2 years ago.
And, when the information is used correctly, it very much provides the
single biggest trading edge you will find on our site. The seminar
will go one hour and you’ll need to register
ahead of time. Also, the space has been limited. If it sells out
(and it looks like it will), Kevin and I will do it again within a
week or two to assure you get a chance to attend. And, I’ll do my best
at the seminar to make sure I slow Kevin down so we can understand the
other 60% of what he has to teach us.Â
Have a great week trading (and go easy early in the week)!
Larry
Connors and
Brice Wightman
Larry Connors
is CEO and co-founder of TradingMarkets. He is also the author of four
books on trading, including Street
Smarts,
co-written with Linda Raschke, Connors
on Advanced Trading Strategies, and his latest release, Trading
Connors VIX Reversals.
Brice
Wightman is a Market Analyst at TradingMarkets.com.