Rev's Forum: Focus on Winning Trades, Rather Than Winning Arguments

 | Apr 10, 2017 | 6:58 AM EDT
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"Suckers try to win arguments. Non-suckers try to win."

-- Nassim Taleb

For months now, the bears have been arguing that the market is doomed. With the Fed hiking interest rates, a poor jobs report this past Friday and arguments that the Trump rally is running out of steam, it is easy to understand the arguments. Throw in increased geopolitical issues over Syria and Russia, and the negative thesis is downright compelling.

There is only one problem: the market doesn't care. While arguments have been loud, the market has done nothing. Over the last eight trading days, the S&P500 is close to unchanged. Small caps have been relatively weaker, but the market has been doing essentially nothing despite significant news flow.

Too many bears are worried about winning the argument, rather than making money. They have a thesis that they believe is compelling and are going to keep spouting it until it works. Eventually there will be some negative developments that take this market down, but winning the argument is not the way to win in the market right now.

The way to win in this market is to stay focused on price action and not be unduly influenced by all the experts and pundits that claim to know what is going to happen next. They have been wrong for so long, you must wonder why anyone even pays attention to them

If you follow the market even a little, it is easy to understand the bearish case. The list of negatives is almost too obvious. How can the market not correct, when we have a more hawkish Fed, little progress on fiscal policy and a mixed economy? With stock valuations at extreme levels and a high level of complacency, it is impossible not to be at least a little concerned.

What the big picture bears keep forgetting is that the bulls aren't arguing with them. The bulls are focused on making money and they do that by looking for trades that work each day. As long as there are stocks that are working and the dip buyers keep supporting this market, they are fine. The bears can argue all they want about how illogical this market might be, but it isn't making them any money.

My game plan for dealing with this market is simple. I'm not making any big directional calls. I'm not going to argue with the bears, but if the indices start to weaken and take out some support levels, then I will press some index shorts.

At the same time, I'm going to focus on finding some good trades in individual stocks. There are charts that are setup well, such as Alibaba (BABA) and Momo (MOMO) . I'll be posting more as I find them. If they don't work and the indices struggle, then we can listen to the bears.

Focus on winning trades rather than winning arguments about the health of the market, and you will produce better results.

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