“Patience means being wholeheartedly engaged in the process that’s unfolding, rather than ripping open a budding flower or demanding a caterpillar hurry up and get that chrysalis stage over with.” – Sharon Salzburg
For the last few weeks as the stock market has gone straight up since the election, I’ve mostly let our long positioning in the portfolio work for us without adding any new hedges or chasing momentum. I’ve mentioned that there just hasn’t been enough outright greed in the stock markets to turn the path of least resistance from higher to lower…
I’m not sure that’s the case any more. In fact, I’m turning increasingly cautious about the near-term for the stock market here as all of the major US stock market indices are at all-time highs, the near-term stock market charts are through the roof and I noticed yesterday that my old friend Rev Shark Jim DePorre noted that “I’m told that the SPY (S&P 500) is set to close the farthest outside the top of its weekly Bollinger in its history.”
Over the weekend I had three different conversations with retail investors about the stock market and each conversation was essentially them trying to convince me that they should be putting more money to work in stocks right now. They told me they should be putting more money into the stock market right now because:
“Trump is pro-business.”
“Interest rates on CDs and savings accounts are too low”
One friend, an soon-to-be retired tech executive, put it simply, “I’m feeling left out as the market goes through the roof.”
Hmm, let’s just step back from the fray, from the party, from the fear of missing out, from the…greed?
To be clear, I’m not in any rush to get out of our longs or otherwise bet on a crash or that the end of the long-going Bubble-Blowing Bull Market is over. And I wouldn’t run out to build up a short positions or put positions to try to game the next 5-10% move in the stock market. But sometimes it’s important to be reminded that you don’t have to buy, you don’t have to rush into more long exposure right now with the DJIA flirting with 20,000 for the first time in history.
Speaking of the DJIA nearing 20,000, remember that I’ve been saying we’d likely hit DJIA 20,000 before this Bubble-Blowing Bull Market is over. Here’s me reminding people to buy some stocks back in September 2015 when the DJIA was in a near-term downtrend with fear-rising as it fell back below 16,000:
“I do think we’ll see DJIA 20,000 before this bubble-blowing bull market we’re living through is entirely over. Corporate earnings are a big issue for all policymakers — the Federal Reserve, along with its laser focus on the stock market itself, has gone to the point of chastising China for not handling its market crash better. Meanwhile, Main Street is finally starting to feel some improvements of its own, no thanks to 0% interest rates and bank bailouts.”
The upshot is that there’s huge value in being reminded to step back and catch your breath. Most of my TradingWithCody subscribers have been with me for several years and followed me analysis for years before that. And one of the reasons they tell me they get so much value of their subscription is because I’m able to help them realize/remember.
It’s okay to be patient. It’s okay to be cautious when stocks are going crazy through the roof for weeks and/or years on end. It’s okay to hold onto most of your your long-term Revolution Investments (especially if you’ve been nibbling on crashes and trimming on spikes) even as we think the near-term set-up is probably bearish.
One other trend to note in the stock market is how many crappy companies are seeing their shorts tank. And most of our shorts are continuing to fall, hitting new lower levels than they’ve been in months, as we’ve got 20% profits on our HLF short, the HUBS short is profitable itself as the stock has fallen 20% in the last few week. Meanwhile, the banks and cyclicals are set-up for pullbacks from their straight up charts too. US Steel is down 15% since I noted it’s chart was “short-able” last week.
Move slow. Be patient. Don’t be greedy. Rock on.