"Happiness is not something you postpone for the future; it is something you design for the present."
After the hints on Friday by Janet Yellen at an upcoming interest rate hike it would have been very easy to assume that the market was ready to correct. It is a seasonally weak time of the year for the market; this last week of August is notoriously slow, the indices have been trading in ridiculously tight trading ranges for weeks and, with earnings season over, there aren't many positive catalysts. With the bears growing even louder about impending doom, it seemed like a good time for the market to correct.
However, as this market has proven repeatedly, that sort of logic just isn't a very good approach. Forming a negative thesis and then waiting for it to work will absolutely drive you nuts. Everyone knows we will have a big, nasty correction sooner or later, but if you focus on that rather than what is actually happening right now in the present you are going to underperform.
Market players want to establish an edge. They want to stay a step ahead of everyone else, which is why there is a tendency to form a "market thesis". We figure if we have a plan on how to deal with the shifts that are certain to occur, then we will have a jump on everyone else and be able to rack up some relative performance.
The problem is that in our zeal to figure out what happens next we can overlook what is happening right in front of it. The action on Monday was a particularly good example. There really wasn't any obvious reason for the market to rally. There is a tendency to celebrate the Fed no matter what it does, but hinting at rate hikes isn't something that usually produces strong action.
If you focused on the Fed or the upcoming jobs report on Friday or the fact that it was a slow August Monday, then you missed out on some good trading. Names I mentioned, like TPI Composites (TPIC) , Airgain (AIRG) , Ocular (OCLR) and Facebook (FB) jumped higher as if there wasn't a worry in the world. You could easily talk yourself out of these trades for a variety of macro reasons, but trying to position yourself for future rewards was not very satisfying.
In most endeavors it can pay to delay our satisfaction. Short-term discomfort will help us to profit to a greater extent in the future. That sort of logic doesn't work very well in the market. The folks that have been positioning themselves for the inevitable correction aren't benefiting by ignoring the present action. They are missing out and would be better served to grab short-term satisfaction and worry about the long term issues later.
The bears are going to be right one of these days, but foregoing short-term opportunity because of a long-term thesis results in chronic underperformance in the near term. You can build a big cushion by simply trading the opportunities right in front of you every day. Don't be blind to them because of some longer-term thesis.
We have a little early pressure due in large part to a European Union tax ruling against Apple (AAPL) . While the indices didn't do much intraday on Monday, it was a good day for stock picking. That will be my focus until there is a change in market character.