I read lots of newsletters and blogs just to keep up with the stock investing field. One of them is called Daily Trader's Alert, written by Sam Collins, a technical expert at OptionsZone.com. The following is from his column yesterday (Wednesday, March 31).
As our readers know, I've remained cautiously bullish even as the major indices broke to new highs and our internal and sentiment indicators hovered at dangerous levels.
I've warned again and again of the "overbought" condition of the market and its need for a correction, and here is the tough part, while still riding the "long equities" train. Even though it's been a profitable ride for us, the resilience of the trend higher has provided this daily writer with some anxious moments.
Now one of the highest profile analysts and a renowned technician has publicly expressed his frustration with the market. I share with you part of what Mark Arbeter, chief technician of Standard and Poor's told subscribers yesterday:
"Quite frankly, we're tired of calling for a pullback that never comes, and this week, we turned our quote machine off on two different days, as we couldn't take it anymore. Many times when the monitor goes off and my mind wants to throw in the towel, we are close to an inflection point. It's just the opposite of the movie "Trading Places," when Mortimer Duke screamed, 'Turn those machines back on.'"
Here's what caught my eye in the above quote:
- Dangerous
- Need for a correction
- Anxious moments
- Frustration
- Tired
- Couldn't take it anymore
- Throw in the towel
But the other thing about that list is, it's all emotional. Stock investing should be emotion-less, a business. I instinctively resist treating the market as if it were a person, or a wayward child, or a bad dog that "needs a correction," gives you "anxious moments," and brings you to a point that you can't "take it anymore" and want to "throw in the towel." I resist the common metaphor of "Mr. Market," an OCD, ADHD, manic-depressive whose purpose in life is to fake you out and screw you over.
The market is just that, a market. It is a place for buying and selling, with thousands of individual stocks being traded (bought and sold) whenever the market is open. Every stock has its own set of buyers and sellers. The prices of individual stocks change all the time. The market sets a price for each stock through the process of trading. Each party to each transaction is trying to gain the greater return over whatever time-frame they are targeting.
No one can predict, with any consistency, the market's moment-to-moment or day-to-day movements. Those result from the interactions of thousands of people, some acting alone and some acting on behalf of institutions, all using different approaches, pursuing different agendas. Anyone who's ever sold a piece of furniture on Craigslist knows what I mean. Some buyers and sellers are rational people, some are not. Some make decisions based on incomprehensible logic. Some have their facts all wrong. In the stock market, some trades are made by computers which may have been programmed wrong.
If you widen out your time frame, market movements generally follow more predictable patterns...prices follow earnings, trends tend to continue (until they stop), that sort of thing.
Investing should be fun. Some of the decisions you make will be "wrong" in the sense that they don't work out, even though logic (your logic) says they "should."
Protect yourself against bad calls by not going all-in, hedging, using sell-stops, or conducting periodic Portfolio Reviews (the latter two are my preferred methods). But I won't put myself through the daily emotional wringer of the sort described above. It's not worth it, and more to the point, the emotions probably lead to more bad calls.
As they said in The Godfather, it's not personal, it's business.
