This weekend on Twitter (TWTR) a reader wrote, "Your constant beating of the drum to stick with the market as long as price action is strong is one of the best calls that I have ever seen and I have been doing this for 30 years."
That is a great compliment but I'm not pointing it out just because it makes me feel good. I'm pointing it out to highlight how important this pattern of thinking is when you are trying to navigate the market. Price action is the only thing that can be evaluated effectively on a daily basis. You have to stay with what is working as long as it is working.
For a variety of reasons, most market players feel a strong compulsion to keep trying to guess when the market is going to turn. Maybe it is because we see these sorts of predictions all the time in the business media. Pundits calling for market tops or bottoms are good stories and attract attention even if they seldom are right.
Many market strategists have a strong inclination to constantly make predictions because that is their job. When they show up for work they can't just say "stay the course", they have to try to pinpoint turning points and they will always have great arguments and logic to support their predictions.
In my years of trading I have never seen anyone consistently predict market turns with any degree of accuracy so why should we play that game? The cost of prematurely calling a market top can be tremendous. The only logical alternative to constantly guessing a market turn is to react to changing conditions rather than try to anticipate them.
This isn't rocket science. It is common sense but market players have been conditioned by institutional Wall Street and the business media is to seek out "experts" for advice. These smart people will tell us what to do and since their job is to predict they will keep on predicting regardless of their track record of history.
There are lots of reasons to predict a market disaster but so far the price action is just fine and I'm staying long.