After a strong multi-day run in the indices, there is some selling and profit-taking pressure today. So far it isn't very intense but it is a good reminder that it is important to have a plan in place for dealing with a market that doesn't go straight up every day.
As the old saying goes, 'everyone is a genius in a bull market'. It is very easy to trade when stocks go up every day but it is the way in which you handle the inevitable pullbacks that will determine your level of success. A market pullback should never be a big surprise. You have to always be prepared for the action to shift.
It is important to understand the distinction between predicting what is going to happen next and being ready for what happens next. Most market players seem to think that it is prediction that will determine their success. The truth is that it is their planning that will determine how well they do.
This morning when the market sold off, I didn't panic sell anything. Instead, I looked to buy some names that seemed to overreact. I didn't predict that it would happen but I had a plan in places to deal with that inevitability.
If you find yourself rooting too hard for the market to move in a certain direction then you probably have not done sufficient planning. We can't control what the market is going to do but we can control how we react. Market movement should be taken in stride. When we start wishing and hoping that the action will shift then we are not in tune with the action and will have a hard time navigating.
Will the mild selling that we are seeing today accelerate? Maybe. I really don't know but if it does then there are a number of things that I will do. If the selling dries up and momentum returns then there are some different things that I will do. I'm not going to waste my time trying to predict the movement. I'm going to spend my time thinking about what I will do in a variety of different situations.