Take Gains as You Get Them

 | Dec 05, 2012 | 3:28 PM EST
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I have to head to an appointment, so I am going to shut down early today. Frankly, I'm frustrated with this market, so it is probably a good idea for me to step away and regroup. The problem isn't that I have losing trades, but that I have just not been able to do much of substance. I am anxious to be more aggressive but I am simply not seeing the sort of opportunities I like.

I have suffered a few nicks by trying to force things and I'm not taking on big enough positions in the trades that have been winners. The net result is that I'm making little progress in building my account, which is always the primary goal.

The challenge is that the action has been downright random. Apple (AAPL) is being killed, many small-caps are acting poorly and the DJIA has suddenly blasted higher because a major bank is firing employees. The market is often quite illogical and that can persist for long periods. It is the randomness of the action that presents a much more severe obstacle.

The reason that traders like me follow trends is that they tend to persist. Trends are the opposite of randomness. When the market is trending strongly you can have a high level of confidence that it will continue for some period of time. In the present market, we simply don't have that. There are a few stocks with some follow-through but, for the most part, we can't be at all confident that a strong stock will stay strong.

The reason for this is obviously the macro news flow and the uncertainty it is creating. We know that any good news is likely to be followed by bad and the resolution of one problem will mean the creation of a new hone. Hence, the best way to deal with it is to take gains as soon as you have them, rather than hold on and hope for more.

Market participants continue to be optimistic that a fiscal cliff deal will come sooner or later and that is what is holding this market up. But it likely won't be as simple and easy as the bulls hope. We should definitely see a relief rally when a deal is done, but a major uptrend may be a totally different matter.

Have a good evening. I'll see you tomorrow.

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