Market thoughts: I can't remember a time when the market has been so dynamic and so much fun to trade and position trade. So many hot sectors right now and the ever growing number of traders are only making the intraday swings that much more exaggerated.
But where to next? I do not see anything stopping us from breaking through the 10,000 level with some authority. Not to say that that we will cross it on the first attempt but after, instead, after repeated attempts. As you all know, I am a big pyschological player of the markets and the players in those markets. After all, without the psychologoy behind news, numbers and the economy, you have nothing at all. These markets are made up of ordinary people striving, for the most part, for the same goals....to make money. In the end it still all comes back to fear and greed, and little else. Figure out the psychology of the market place and I think you have learned much more than by just learning TA. But one could argue, which comes first?
THe 10,000 barrier will be a high hurdle to clear, but once cleared, will prove to be the higher of any further hurdles, 15,000? 20,000? Nikkei here we come.
Greenspan is due to give his speech on, I believe, 1/19/99 (please correct me if I am wrong), and my only hope is that we are not above 10,000 at this point. He has learned some powerful lessons in the past, most notably of which is that he DOES in fact move the markets....who could forget his two most famous words. The Fed will not move this month, and certainly will not raise. A small percentage chance does exist that they could cut another 25, but why? 99 is a new year and they made their late year moves last year to adjust 99. I fully expect them to stand-pat for the next two months. Should this be the case, and as long as he does not utter some other catch phrase to cause fear in the market place, 10,000 is as good as cleared in my mind.
Why, you may ask? I, for the past 5 years have been studying the markets and the makeup of those markets in an attempt to better understand the psychological forces that move them. It is this simple, again in my mind. When I entered the markets 10 years ago, the avg. age of the avg. investor was near 50. This is significant not so much because of the pure number, but instead because of the fact that most investors were truly between 40-60 years of age. Just in the time that I entered the markets, things have changed drastically, and although I have no avg. age numbers to relay, I would be very surprised if that number was much higher than 42. This is what I call my X-factor. Or more simply put, the X-Generation factor. The Internet has changed the face of all transactions and delivery of all information, including investing. With that change, has also come new individuals most adept with the medium of that change....the X Generation folk, like myself and many of you here.
Simple supply and demand models work well when relating them to the markets and basically speaking, with all the new individuals moving into the markets, stocks are rising. Look at the mutual funds, look at discount trading volumes, look at Inet stocks. Money looking for a home, and as we gain wealth and status, more money pours into the markets. We are a nation about fads and sex appeal. The market, right now, is the largest black jack table in existence. Yet, we still here about those that fight against legalized gambling. The one difference with trading or investing is that a bad hand dealt can be held indefinitely ..... try to find that house rule anywhere.
There is a war raging in today's market. Not the bulls vs. the bears as that war has changed and is over in my eyes. The war between those that judge the markets through past performance and those that don't care about past performance. I still marvel at many that use the P/E as a sole method for determining value...these are the people that cling to what worked in the past. I love to hear those that suggest caution before investing in Dell because of the pricey multiples but then suggest YHOO because of their brand name and leadership.....ludicrous. We must change our perspectives and reassess based on today's factors and market conditions.
Don't get me wrong, TA and fundamental valuation still plays a very large part in what will work and what will not but is it not time to stop laughing and pointing at the AMZN, YHOO, BCST, CMGI, et al and ignore what is happening and the psychological factors behind what is happening. And if you can merge the two factors, even better. How about finding those companies that are changing the way they do business to adapt to the new market place all the while still posting good numbers to keep the institutions happy. Find a company like this and you satisfy both sides requirements. MLG comes to mind as just one example.
I look back at 1998 and see the number of trades that I executed and when looking at the execution prices and the +/- of each trade, and then comparing it with today's prices ...... I realize, as I have mentioned before, that a position trader with day trader tendencies would have done much better than a true day trader. At least this is what my sheet tells me about my trading habits and calls. And this is what I am trying to prove in 1999 as well.
Timing, judgement and patience...in that order. I do not know if it is me to hold a position that I know will eventually pan out but that I may have to wait for (ASCT). And how absurd is that really? To say I can make perhaps $50,000 - $100,000 if I am patient for the next month or two, but I would really prefer to use the money now for DBCC or NAVR, what does that say? Greed. But the downside can be tremendous if you make the wrong call, which is where your day-trader tendencies must come into play. For 1999, at least to begin with, I am doing two things to adjust my strategies for prosperous trading.
1) I am reducing the size of my positions by about 1/4 - 1/3. This
will allow me to have a few more positions and also limit my
losses on stocks that drop after my initial purchase.
2) I will be letting my winners run a bit more and will accept it if
they drop back a bit. I will only sell into strenght if I am
reasonably sure that they will be falling, i.e. opening gaps. I
did this with DBCC and grabbe an extra 2 points, but I could have
been more patient and got an extra 2 above that.
And with all of this, there still needs to exist judgement to determine when it is time to sell and that the market has turned or the fire has gone out on an issue.
A profit is always a profit but I feel it has come time for me to try and adjust that which has worked well in the past in order to adjust to today's market conditions.
I even have my dounbt as to whether or not I am capable of this new strategy but looking back at my trading history should be enough to prove that it is worthy of my efforts. However, it is also safe to say that this strategy will most likely only apply to the Inets as this frenzied buying is a bubble that only affects them at the moment.
And to find whether or not this strategy would have worked with your Inet trades, just take a look at any of the issues then vs. now and be the judge. And then ask yourself if you feel it is going to change any time soon. We have all traded the Inets and I have mercilessly taken my 2-3 points and sold with the feeling that I could get back in on weakness, but then never do only to see them skyrocket. ONSL, EBAY, DRIV, CYCH, COOL, EGGS, MALL, UBID, GCTY, YHOO, SEEK, XCIT, BCST, CMGI, DBCC?, NAVR? PROG?.
Again, don't keep an losing position beyond your tolerance but with some of these Inets, but I will be a bit more patient and lock in those 3 point gains as quickly and will instead set my sell limit at perhaps a 1 point gain instead, or perhaps break even.
As always though, I will post my trades and my ravings as to why and what I am thinking about the position. I hope this Inet bubble just affords me 3 more months of stellar gains so that I may try this new strategy. We shall see.
Y2k this year will be very, very interesting. The pyschology of the new millenium will be most enjoyable to watch and I hope it brings us many new opportunities.
Until then, keep your wits about you and trade well.
TJ |
