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The Bear Cave

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Have you overtraded today?

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I saw her today at the reception
In her glass was a bleeding man
She was practiced at the art of deception
I could tell by her blood-stained hands


(The Rolling Stones)


Hey Mick, you wanna talk about the art of deception? One minute, it feels as if the Minx is gonna moon shot and then -- blink! -- it feels like it's rollover city. The reality? The S&P has been in a ten-handle range all day and traders are shuffling back and forth trying to find their way. In case you were wondering, it's NOT you... it really is that cloudy out there!

I've spent the session jockeying between my positions (rolled some puts higher), tonight's earning's models and making calls around the street. As I was ruminating, postulating and hypothesizing with my good friend Succ, we discussed the dynamic of trading and how it's evolved over the years. What's interesting -- and this is consistent with the nature of a bear market -- is how traditionally reliable gauges and styles have become obsolete.

As we continue to wade through the grizzly (and regardless of how long this bullish phase lasts, I've no doubt that it's within the context of a larger bear cycle), the tools we've come to rely on will slowly start to fail us. The only consistency we can expect is that the market is inconsistent and, as such, the onus is on us to adapt. Remember, the Minx has the staying power -- we're the ones with limited amount of chips.

How do we conform? For starters, we allow for a greater margin of error in our approach (regardless of bias). Second, we look for new ways to find the ever-elusive edge. Third, we maintain humility, discipline and patience while managing our emotions. Fourth, we factor all potential outcomes into our risk profile. And fifth, we strive for a balance in our lives that allows us to maintain the proper perspective.

For example, my downside ducks have started to quack in unison (with the notable exception of the NDX field position) but, as always, I've been early. However, I've attempted to employ a methodical approach that affords me the opportunity to (hopefully) use price to my advantage. Is it right? Time will tell -- that's not the point. I simply want to be in a position to prosper if my view pans out and manage if it doesn't.

The entire world is focused on Microsoft (MSFT:Nasdaq) and Intel (INTC:Nasdaq) tonight for the "sign" of the times. They'll surely move the tape (particularly if they've got anything good to say) but I plan on factoring them into my mix rather than letting them dictate my mix.

There are a lot of variables affecting the equity price action (dollar, geopolitics, structural, emotion -- and things we can't even fathom), so please take a deep breath tonight before unleashing the hounds.

Fare ye well.

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