A Fitting End

 | Dec 31, 2013 | 4:20 PM EST
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And 2013 is now history. We had some last-minute games, and that seems rather fitting to a year that many thought was more about central banks and manipulation than about good fundamentals and an improving economy. The indices certainly performed well, but I'm already tired of hearing about it, and I am anxious to focus on the year ahead.

We had a classic holiday trading season, but I'm betting that the first trading of January is not going to be the low of the year like it has been the last two years. Market players always want to start off the new year well, but we sure are set up for some profit-taking once the calendar turns over.

It was a truly remarkable year with the lows on the first day and a finish at the highs on the last day. In the interim, we had only shallow pullbacks. It was a year that rewarded buy-and-hold of boring big-caps and punished day traders and market-timers.

I don't know what will happen in 2014, but I will predict that it is going to end up looking much different from 2013.

I want to wish everyone the best in the new year. I'm looking forward to working with you in 2014 and helping you make it your best trading year ever.

Happy New Year. I'll see you on Thursday.


Dec. 31, 2013 | 12:48 PM EST

Don't Play the Blame Game

  • If you had a bad year, whose fault is it really?

In addition to the endless predictions that the media love this time of year, we also hear about the great calls and miserable mistakes of various pundits. I don't pay much attention because the great calls are usually just lucky guesses rather than part of a pattern of insightful predictions.

On the other hand, there are some excellent traders and investors who completely missed the boat and had a very poor year. If you did poorly this year, should you blame the bearish pundits who reinforced your negative thinking? Is it the fault of the naysayers if you weren't bullish? Sure it is, as long as you are willing to admit that you shouldn't have to engage in any critical thinking of your own.

There are always "experts" on both sides of the market. It's easy to find someone to agree with what you already think. If you follow them blindly, you are going to be burned sometimes, and maybe it will make you feel better to blame them for your results.

The role of a market pundit isn't to tell you what to do. The best market pundits should help you think and provide you with information to formulate your own approach to the market. If you want them to make decisions for you, why not have them manage your money and cut out the whole pretense of translating what they are advising?

I see no value beating up on those who were wrong or in celebrating those who were right. What's important is how well we did sorting out all that information and finding a good way to attack the market. The best pundits aren't those who called the market direction most accurately but those who made us think and motivated us to make the moves that worked best.

It was a horrible year for the bears, but that doesn't mean they were harmful or useless. They gave us plenty of information to ponder and it was helpful to see how they dealt with a market that they failed to understand.

We are responsible for our trading results. Don't blame someone else if things went wrong, but make sure you take the credit when things went right.

Dec. 31, 2013 | 10:39 AM EST

Looking Forward to the New Year

  • I'm rooting for bigger ups and downs in 2014.

With 2013 basically in the books, traders are looking for intraday action as things wrap up. Believe it or not, it is a full day of trading. I complain about this every year, but the Scrooges who control the schedule at the NYSE probably aren't working anyway and don't care.

I'm trying to scalp profits in things like Twitter (TWTR), Organovo (ONVO), Camtek (CAMT), Revolution Lighting Technologies (RVLT) and Fonar (FONR). I have little inclination to build positions right now, but if I can knock out a few trades to conclude the year, I'm happy to do so.

Like most everyone, I'm looking forward to starting fresh in the new year. Although many folks love the market and its one-sided action in 2013, I'm rooting for bigger ups and downs. That is the environment in which traders can really outperform, and it would be nice to see trading skill, rather than the Fed, be more important in driving results.

Keep in mind that we may see last-minute volatility today as strategic moves are made before the end of the year. Some of the thinner stocks in particular can suddenly be jerked around.

Dec. 31, 2013 | 8:33 AM EST

Recalibrating for the New Year

  • This is a good day to reflect on the past -- the good and the bad.

"Tomorrow is the first blank page of a 365 page book. Write a good one." --Brad Paisley

On Monday the market traded in one of its narrowest ranges in years. It's a sign that traders are closing the books on the year and taking a break before they embark on a new journey in 2014. It should be another slow day today with a few traders looking to find some intraday action but there isn't likely to be many big moves.

This is a good day to reflect on the past year and to think about what we can do to improve our trading in 2014. New Year's resolutions are important, because they force us to contemplate on those things that we haven't been happy about. Traders too often focus on their successes and look for ways to duplicate them, rather than think about the negatives and how to eliminate them. The negatives are what typically hurt us more than any lack of positives.

While the media have blared headlines about what a great year 2013 was for the market, it did present a very challenging situation for those who focus on relative performance rather than absolute gains. Making money wasn't very difficult, but outperforming was -- and outperformance is always the goal of the serious trader.

When I look back at my trading over the past year, I see that my biggest mistakes have tended to involve selling too soon, and being underinvested. That was simply because, too often, I ignored my own advice about sticking with the trend and waiting for some actual price weakness before I became more bearish. The market did not undergo a normal level of ups and downs. Instead, it trended in one direction for the entire year. We saw the lows of the year on the first day of 2013, and the highs will have been put in near the last day -- and the indices seldom dipped in the interim. That is not typical market action, but I could have done a much better job of embracing that one-sided momentum.

It is easy to make excuses for failing to be in tune with the market over the last few years, as it has obviously been artificially inflated and manipulated by the mechanizations of the Federal Reserve. Stocks often moved not because of fundamentals or technicals, but because of liquidity and the policies of central banks.

One of factor that was extremely challenging was the frequency with which some of the standard rules of technical analysis failed to work. I don't know how many times I wrote about V-shaped moves, and how wildly extended markets were not resting. These are things that don't happen so often when individual investors are the primary drivers of the market action.

I can go on at length about the market's challenges in 2013, but here's the important thing: Do not attempt to justify your mistakes. Rather, find a way to correct them in the next year. Obviously we have to realize that the central bankers can control the market to a great degree, and that they must be respected regardless of what we think about other market conditions. In 2014, we may find that the Fed can be a major negative as well as a positive.

One of the main things I want to work on 2014 is taking bigger, more concentrated positions. This has always been a challenge for me, but it is probably the best way to enhance returns. The problem is that, in order to do this, you have to have a higher tolerance for volatility. You can't hold big positions for potential gains and not also expect to see some significant downside at times. I built up my portfolios in a very steady manner, and it is hard for me to accept a higher level of volatility as a trade-off for bigger gains.  I'll be discussing that in the year ahead as I look for ways to grow as a trader.

I'd love to hear about your resolutions for the year ahead. Post in the blog and make a public commitment to the change that you want to make.  

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