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Mr. Market Reads From His Own Script


Regardless of how much we desire to impose our beliefs upon Mr. Market's actions, it will not work.


Good morning Minyans,

If there is one thing I desire to stress this morning it is the most important lesson I have ever learned from my years as a trader. Mr. Market will follow his own script whether we like it or not and regardless of how much we desire to impose our beliefs upon his actions, it will not work. Mr. Market's sole job is to do exactly what will frustrate the most people all the time. My point is simple, if you find yourself comfortable in your thesis, which tends to correlate with the prevailing crowd, simply be aware that this is rarely the script Mr. Market will follow.

Rather than be sucked into the general thesis, I resolve to stick with the underlying charts. I go through thousands each evening in order to identify what is moving, gaining traction, rolling over or anything in between. The damage that has been done is severe and at this point there are many more short setups than longs however I am remaining open minded.

I am very curious to see if Mr. Market decides to climb a wall of worry and if this would be the action that would frustrate the most people. Or, if Mr. Market will simply falter from here and say goodbye to all of Tuesday's move and more. At this point, I see no charts confirming either, so I will remain open minded and flexible. I hope you will join me.

Some interesting thoughts:

  • On the short side, shippers look vulnerable after weak bounce attempts that was quickly followed by more selling. I am sure they will be heavily shorted, so I am waiting for the squeeze to reach a max before even considering stepping in. High on the list are Dryships (DRYS), Genco Shipping (GNK) and TBS International (TBSI).

  • Small Aerospace companies are hanging very well with Aerovironment (AVAV) and Be Aerospace (BEAV) still within technical healthy ranges. I am watching for each to continue their consolidation and will look to step in.

  • One of my last remaining positions, which I actually added to the other day per my Buzz, Charles Schwab (SCHW) broke out yesterday. I used the strength to peel some back however it looks solid and is acting well. If this name can continue to set up and hold recent gains, I will look to rebuild this position quickly.

  • The solar slam is starting to interest me as I think they will be in play for the next several years. I would like to stick with the top tier and focus my attention on First Solar (FSLR), Suntech (STP) and Sun Power (SPWR) however second tier such as Evergreen (ESLR), Ascent Solar (ASTI) and Memc Electronic (WFR) also would spark my interest when they settle down. At this point I am doing very little.

  • I was so thankful to see Santa answer my letter on Tuesday and I took the opportunity to book some quick profits in my wish list plays. From this point on, I will wait until I see charts confirming whatever move is coming next and will stay far away from the prevalent views of others.
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Position in SCHW

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