UP AND DOWN
Once again, I'm into listening to the news. One reason is that I'm a news junky. The other reason is that I'm a student of people's behavior—especially in the realm of determining positive and negative thoughts and comments. In the morning, it's the business channels, and my favorite has become Stuart Varney on FBN. I think he has the best attitude of all. More on this on another post.
For now, let me weigh in. I rarely do this, weighing in on the movement of the market, but I see people straining to define why the market does this or that. So, here, I will make my short-term predictions. But come to think of it, these are my long-term predictions as well. You know, I don't really like that word prediction. I like the word projection. But, alas, the word prediction has gained purchase, and over the years has been used pervasively. So here goes:
- The market will go up and down. There will be volatility. But as one wise sage said: "Trust Movement."
- The market will primarily follow the reporting season—meaning the quarterly news filings.
- It will go up a few days and then down a few days. At the end or beginning of earning's season, there may be a few weeks with mostly down days, and then a few weeks of mostly up days.
- The pundits will try to pigeon-hole this into a sound bite. The pundits are usually wrong. They react to the news, but usually they under-react and then over-react.
- We need to find a strategy that uses these movements. Straight options is one way, but very risky. One stock is effected be their sector, then by the whole market—read that economy—and all of this effected by the world news.
- I like Writing Covered Calls because this volatility gives us plenty of opportunities to get in (by selling and capturing the profits now) and then out, by buying back the sold option. If you don't get this method, read this again. We do thing the opposite of the normal way. By doing this, we put market forces to work for us, not against us. The primary market force is this volatility. It provides the opportunities we need.
- We can excel at this process. First, put the emphasis on cash-flow. Do many short-term trades, with the focus on the exit point.
All in all, for most things in life, we get what we deserve. If we want to deserve more, we need to qualify for better things.