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Environmentally Cautious



I don't know about you folks but every earnings period to me seems like a sobering up of the marketplace. It's almost as if everyone (at least that I speak to) forgets about fundamentals in the interim periods between earnings, and then for two weeks each quarter everyone is an analyst! The top line was light! The bottom line was light! Guidance was poor! These are often, and for good reason, the catalysts behind many recent stock moves.

On the flipside, during the period between earnings, it is perceived that technicals drive the marketplace. Everyone is a technician. People talk about levels, charts, overbought and oversold conditions. Sure, we are buying or selling stocks based on some catalyst, which may in fact be fundamentally based, but overall, it is technicals that are driving us when and where to buy those ideas. We don't have bombshells dropping on the market every night like we do now.

If you are an investor, and are in stocks for the long run then you really don't care so much about what "level" a stock is trading at. For traders though, this is why we exist. Our purpose is to attempt to take advantage of market fluctuations and we use technicals and levels as a guide.

In short, my point is that it is hard to be a successful trader if you are not aware of your environment. Using charts during earnings season may not be the best way to trade for obvious reasons. I am sure many of you, like me have lost money trading off charts during this choppy period. In my opinion, it is poor situation to trade simply because the market is not driven by technicals during earnings season.

No positions in stocks mentioned.

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