Thursday, March 01, 2012

Market Thoughts and Trading on Emotion

The market shrugged off a weak ISM number and potential Saudi pipeline disruption to rally. The Dow failed to retake 13,000 and it does look a bit like it's churning. But the number of stocks making new highs, aka the internals, look good. Of course, that is the rear view mirror tonight. Tomorrow may be something else. And if we go down, then the churning here at the highs gains traction.

And don't look at a monthly chart of the market. Don't do it. If you believe that we're in a secular bear market and the market is likely to reverse down near the top of the long-term trend, don't look at the monthly chart. It will scare you.

Oil rallied up to $110 on the rumored hit to the Saudi oil pipeline.

I remain about 80% long, plus or minus. While I reduced some beta last week, I haven't made any rebalancing moves this week. Although, I continue to think about it! The market is going to correct back to the 50-day moving average someday. Everyday we get closer to that event. Truly, we do.

I don't know about you, but whenever I have cash on the sidelines, it is very tempting for me to trade individual stocks. As in high-frequency. So, I've been doing that in very small sizes and having some good fortune. Everyone is a good stock picker when the market rallies, so I'm not attempting to gloat here. Rather, I'm just making the point that even though I'm fairly disciplined, I'm subject to the emotional temptation of trading when the market is hot. And that sort of thing works as long as it works, and then it doesn't work anymore.

For example, highly volatile biotechs with calendar news events on the near-term horizon are very tempting to try and get on the right side of the roller coaster ride. These kind of stocks are like crack. Or maybe like gambling.

And we all know I like to gamble, right?

Just saying.

posted from Bloggeroid

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