If I Had My Druthers

 | Feb 24, 2012 | 8:25 AM EST
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"A preoccupation with the future not only prevents us from seeing the present as it is but often prompts us to rearrange the past." --Eric Hoffer

One of the hazards of writing about the stock market is that there often is an inclination to make dramatic calls. If you want to catch people's attention, the easiest way is to predict something monumental is about to occur. Unfortunately, predicting that we are on the cusp of some major event generally doesn't make for good trading.

The vast majority of predictions that the market is about to turn are either wrong or very poorly timed. Obviously, you will always be right if you stick with a bullish or bearish call long enough, but for practical purposes, if your timing is off just a little, it is a money loser even if you turn out to be right.

The nature of the prediction game is that the 90% of the calls that are wrong are forgotten quickly, while the 10% that are correct are celebrated as the product of tremendous insight and brilliant logic. The one thing that great market pundits tend to do is to make sure that when they get it right, they attract as much attention as possible while all the poor calls get lost in the fog of history.

If you are a market pundit looking to make a big, dramatic, attention-grabbing prediction, the current market environment is extremely frustrating. You have to hope for a reversal, and that just isn't happening. The best way to play this sort of action is not to fight it but just ride along. The worst thing you can do is keep trying to anticipate a collapse.

Ironically, the longer the market trends like this, the greater the inclination to call a top, which helps keep people poorly positioned and keeps the trend going in the same direction. In other words, the more we fight a trend and hope it ends, the more likely it is to continue.

Personally, I'd love to see the market pull back. I'm holding lots of cash and I don't see many charts that I like. I would like to see things reset a bit. The easiest thing in the world for me to do is to write about why this rally is doomed and how a major turn is going to occur at any moment.  That is what I'd like to see happen, but I see no evidence that it will happen right now.

Although the inclination to make the big dramatic call that a major reversal is coming is strong, there is no reason for it other than personal bias. The trend is continuing, the weakness has been bought, and the anticipatory bears keep getting burned.  Many traders would prefer different action, but that is a good reason not to predict a change.

We have little news this morning and minor strength to start the day. High gasoline prices are going to give the bears some negatives to discuss, but until the price action turns weaker, there isn't much to do but continue to embrace the positive action.


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