It's a New Trading Day

 | Aug 15, 2011 | 8:54 AM EDT  | Comments
  • Comment
  • Print Print
  • Print

The secret to a rich life is to have more beginnings than endings. -- Dave Weinbaum

After the historic level of volatility last week, indications are for a slow start to the new week. Many European markets are closed for the Assumption of Mary holiday, there aren't any major news headlines and we are at the peak time for summer vacations. Of course, the wild swings last week helped to scare some folks completely away from the market as well, which is reflected in extremely high levels of withdrawals from stock equity funds.

Although things are calm at the moment, many market players are feeling unsettled as confidence levels have been drained by the wild swings. No one has been able to predict what is going to happen in this market lately and that is going to continue to be the case. There is no reason to think that we have suddenly put aside all the issues that caused the chaos in the first place and the potential for some wild swings remains extremely high.

My approach lately has been to try not to anticipate a bottom, but to cherry pick a few trades as opportunities develop. The big intraday swings are very good for day trading, if you are so inclined, but offer free good chart setups and don't give longer-term investors much comfort. I find maintaining a very short-term timeframe is the way to go until an upward trend develops again.

As I reflected on the action this weekend and worked on my strategy for the days ahead, the one thing that struck me as more important than anything was maintaining the right mental attitude. I need to make sure to treat each day as if it is a new beginning and I don't let the baggage of the recent market action weigh me down.

When the market goes through a tough period like we have had lately it is very easy to become discouraged. You focus on your losses and are tempted to throw in the towel rather than do battle with the irrational and unpredictable action of the market.

I've often written that bad markets will wear you out rather than scare you out and that is the biggest danger many of use face. If the market struggles again and we have some more down days, it is going to be very tough for some folks to maintain a positive attitude.

One thing I try to do mentally each day is to mark to market, or treat any position I'm holding as if I bought it that day and forgot about any unrealized gains of losses I may have. That allows me to be much more objective in making a decision about whether or not I want to continue to hold the stock.

Looking at the market with fresh eyes and emotions each day can be very liberating, especially after we have gone through a tough period. In fact, I strongly advise all investors to clear the decks every once in a while. Sell everything except for your core, very long-term holdings and then contemplate the market. You will be stunned at how liberating it can be and how different you will see things.

Our job right now is to forget last week and to look at the week ahead with an open mind and a high level of optimism. We can make of it whatever we want to as long as we remember that the market will allow us to start fresh any time we want. Futures perked up slightly, but it continues to be very quiet out there. We'll see if the calming action attracts some buyers. The longer we stay steady the better off it will be for the bulls, but it won't take much to rattle this market again after the stunning moves of last week.

Columnist Conversations

We are currently testing the key resistance decision in ICE. Do not consider an entry without a trigger!! ...
Is this the biotech revolution or the biotech bust? View Small Cap Biotechs Like Never Before: Transparency is...
EA reported June revenue of $775 mlm vs. $714 est. much better than expected. EPS of $0.19 blew away the St es...
BIDU still has some higher targets, but it's a good idea to TRAIL UP stops when you EXTEND the prior swings. ...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.