Just Listen to the Price Action

 | Jan 17, 2013 | 1:50 PM EST  | Comments
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Once again, the market continues to levitate higher on very slow action. There are more than 425 new highs and breadth is excellent, but few signs of wild momentum. It is just a steady slog higher on the back of doubters and underinvested bulls.

My main message lately has been to stick with this action until there is reason not to, and that has been good advice. It is so easy to fall into the trap of trying to call tops because it seems like the smart thing to do. Obviously, only the naïve and uninformed would stay with this market when there are so many good reasons to worry. I've learned many times not to think too hard when the market is trending strongly.

There are always folks in action like this who are on the wrong side of the move and quick to tell us that they are ignoring the charts. The charts have been good at predicting this action, and if you focused on them and turned off all the outside noise, you'd be doing well. What I find ironic is that these bears who tell us charts are useless love technical analysis when it confirms a view that they already hold. Too many people like to use TA to merely shore up an opinion that they have already formed. When the charts vary from their thesis, they ignore them and call them useless voodoo.

I strongly believe that it is far more important to listen to the price action than it is to form theories about why the market will move in a certain manner. There are always great compelling arguments for any view you want to take, but simply trading what is in front of you is usually more profitable than anything else.

This market will eventually roll over, and all the bears who are still underwater will proclaim victory. They will make you wonder whether you should have anticipated disaster, but I'm confident that if you react as events unfold, you will be far ahead of all those smart people who are so busy making predictions.

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