Grown Men And Women Cried Like Babies

“I hated every minute of training, but I did it because I loved being a champion.” – Muhammad Ali

Let’s not panic, let the market do the talking.

The Fed did the expected. Now it’s up to us to find ideas.

On Monday we outlined two scenarios. One where energy and financials join the tech rally and we rocket higher. The second where tech loses its bullish mojo and the bears take control.

Yesterday unfolded as heavy volume reversal candles. The SPY ETF also lost the coveted $400 level. More of a psychological number than a significant one. A price for us to read the tape. Kind of a north star to know if there’s a bias.

I’ve traded through several bear markets. This is the least bearish by far. Sure the market is down, but it doesn’t “feel” down. It actually feels orderly. We’re getting four to six week trends. Let’s use this information and run with it.

Bear markets are vicious with constant days of heavy selling. A full week of red energy candles. You’ll find good examples during the two years after the dot-com boom ended. When the market turned down many traders were deer in the headlights. Trades without a stop loss.

Easy fortunes made by averaging down into positions, given back by the same strategy. Once Wall St. finally held those companies accountable for earnings, there was no lifeboat coming for poor trading.

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I personally saw grown men and women crying. Traders with no idea how to stop the losses, because they had no idea how they made the money in the first place.

Maybe I was naive, but I saw the mess as an opportunity to learn. To trade both sides of the market opened the door to hedging and shorting. I’ll confess it’s much easier to be long (buy stocks) but shorting was what the market offered. So I took what was on the table.

It also showed me how fragile confidence can be, especially in the markets. This game will humble you. Get arrogant and you will get slapped silly. The market rewards skill. The riches are abundant if you respect the downside and learn to improve the upside.

Long-term success requires making planned decisions. 

“But the market always goes up…” Sure I heard that before. It’s a statement by those unwilling (or unable) to make a plan and follow it. I can also tell you stories from 2008 when a man named Charlie bawled in my office. Two years from retirement and in shock as his retirement account got cut by two-thirds.

All because his plan was to let the market fix things for him. So a paper millionaire without a clue. Without control of the outcome.

Am I telling you to scare you? Absolutely not. I’m hoping you learn from it. Learn to make decisions. Learn to think things through.

Learn to trade successfully in these market conditions, and you’ll own the golden goose.

Does this mean you need to short every day? No. Not at all. But it does mean that together, as a community, we’ll need to dig a little deeper to find the best ideas. And also be patient in between.

Everyone wants to win, those who win put in the work. 

I know that’s a dirty word, work. Everyone wants the easy button. But it’s in times of adversity that you find out how bad you really want it.

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