Awaiting Confirmation: ‘Less Is More’ In Messy Market

I don’t mean to sound like a broken record, but the market is still messy.  Yes, even at all-time highs.  And, to make matters more difficult, social media is turning into an opinionated war zone of bulls and bears. This is the time where many traders feel like they need to make a statement… but, in my humble opinion, that statement should be “less is more.”

I want to re-share something I wrote regarding the market action a few weeks ago:

[T]his market requires trend investors to remain patient and nimble (awaiting confirmation) and short-term traders to remain surgical and disciplined.

I also want to share something fellow SIM contributor Sheldon McIntyre shared recently on Stocktwits:

This is a market enviroment that can lead to the “over-trap”…over-anaylze, over-think, over-trade…etc. $SPX

— Sheldon McIntyre (@hertcapital) May. 13 at 09:03 PM

In short, stay disciplined and fight off the urge to over-think and over-trade:  let the price action come to you. I know, easier said than done, but some of my worst trades were those that I jumped into for a quick fix and without a manageable plan.  Having a plan is your life preserver.  We all make losing trades. That’s part of the game. But what separates pros from amateurs is your ability to take a small loss and step back and re-evaluate. Capital is king.

Each day is a new day and if the market starts to move in sync and directional indicators begin to line up over the coming days, you’ll have time to get in on the long or short side. For now, respect the cross currents and take care when trading. Note that Andrew Thrasher and I recently wrote about the bevy of market divergences taking shape and Andrew Kassen has been on top of the recent small cap underperformance.

Below is a chart highlighting the uncertain candlestick “tails” on the S&P 500 over the past few weeks.  Note that the move higher over the past two days has yet to see follow through… but could be the fifth minor direction change of late.

No position in any of the mentioned securities at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.