Sunday, May 20, 2007
To trade or not to trade a bull part 2
I'm going to revisit this idea because I think it's important right now. Should you try to trade in and out of this bull market? My thoughts are no you shouldn't and here's why. This is one of the longest bull markets in history. There have only been 3 longer. We haven't had one single correction of 10% or more during this entire bull. Fear has been reduced to a minimun. AKA investors are ready to buy any dip. Private equity is taking millions and millions of shares off the market not to mention companies are buying back shares heavily. Now I see where China is going to let banks invest abroad aka even more demand while supply is shrinking. Oh and if the retail investor were to come back in watch out. We are setting the stage for a parabolic run. To my eyes we are already in a parabolic run. When a market goes parabolic it just doesn't give you a chance to get in. So the last thing you want to do is lose your position by trying to get cute. Lately I've watched as we had 2 small corrections and the sentiment went from "I'm going to go long as soon as we get a correction" to "this is the top time to short" in the blink of an eye. This is how bull markets work they have sharp corrections that scare the weak hands out. That is why I watch the COT report. The commercials are not weak hands, they don't get scared out. What they do is buy your shares when you let your emotions take over. Trading takes disipline. Trading emotionally during this run will more than likely just guarantee that you give your money to the big boys. This is a time for logic. The market is strong right now. Make a plan and stick to it. My plan is to hold my long positions until the COT tells me to sell. Period