If there is one word I would use to describe 2008, it would be exhilarating. For 2009, I would use the word draining. I have put all my energy in analyzing and trading in 2009. On an absolute scale, I have done OK this year. On a relative scale – which is the one that really counts – I have stunk. I am disappointed in myself and have tried to learn as much as I can from my errors.
With this in mind, I offer those beliefs which I plan to "buy" for the coming year, those on which I am neutral, and those which I plan to "sell".
- Precious Metals – I have been a doubting Thomas on this the entire time, and I was wrong. The frantic creation of fiat currency by the Fed has been a godsend for precious metals fans. I cringe at the fact I sold my bullion a year ago, buying into the EWI notion of a plunging gold market. I am planning to be a proud member of the gold bandwagon.
- Retracement Levels – This is one of the few technical methods that has been, at best, indispensable, and, at worst, non-harmful.
- Setting Stops – risk management and consistent use of stops has saved my neck this year. I have been extremely rigid with this habit, and with good reason.
- Inverted Head and Shoulders – Specifically, at the top of price movements (or at least not at the bottom). I used to dismiss this pattern, but both gold and equity indexes in general have shown this pattern to be powerful and effective. I'm a believer.
- Diversification – A large number of small positions is a style that works for me, and it has done me more good than harm this year.
- Rampant Consumerism – It saddens me to realize this, but Americans will not shake their profligate spending. All the anecdotes you see about the new austerity are a big pile of crap. The citizens of this country will buy stuff they don't need with money they don't have until the end of time. Shame on me for thinking otherwise.
- Elliott Wave - The jury's still out on this one for me. During the bear market, I wanted to know everything I could about EW. At this point, I'm really starting to wonder if, as many people say, it's a spiffy way to mark the past, but useless as a predictive tool. I'm willing to withhold judgment for now.
- Options – Nothing against them specifically, but my style of trading has changed such that I've stopped trading options altogether.
- 1937 to 1942 analog – I have been "married" to this analog pretty much all year. Perhaps I should have this in the "Long" list, since its prediction of a huge upmove has panned out, but my skepticism is on the uptick since its call for a downward turn has missed, and missed, and missed. Again, the jury is still out. Some meaningful weakness between now and year's end would strengthen the case.
- Cycle Analysis – I was thumbing through my Trading Tome, and I saw example after example of compelling looking cycle predictions which didn't amount to jack squat. From lunar cycles to the Caralon spiral calender, this entire category has been a letdown for me.
- Apocalyptic Viewpoints - Bearish as I've been, I've never been a jumping-up-and-down the Dow-is-heading-to-400 windbag. There are plenty of folks out there who are, and I've learned that their viewpoints have as much credibility as the Dow 36,000 crowd.
- Overnight Trading - Trading the /ES was really profitable for me in late 2008, but between the thin-volume shenanigans and the bolt-from-the-blue spikes, I quit the /ES trading scene months ago. I don't intend to go back.
- Doubting Manipulation's Efficacy - I was skeptical that the government could manipulate the markets, mainly because I figured if it was so easy, the collapse in 2008 wouldn't have happened in the first place. It seems that the government simply got caught with its pants down, but once they had the tools in place, they can make the market do whatever they want. Sad, but true, and important to recognize.
So that's it; I was a pretty cynical fellow a year ago, but my cynicism has probably doubled now. I'll be as cynical as I need to me in order to succeed in my trading. I want to draw as many lessons from this year as I can.