Category Archives: Psychology

Your Brain

By -

I got an interesting email yesterday:

I’m a new member – and I love your site! I’ve trade stocks through my own account for years and I feel your site is a truly great resource –  which brings me to why I’m directly contacting you:  I’ve recently partnered with the University of Illinois to research what goes into a trader’s decision when they look at charts. Specifically what part of their brain is involved – and conversely what part of their brain is actually better at it.  The first test is helping establish a baseline and it involves picking a stock direction when looking at an anonymous chart – the respondent is only given one second to decide – which eliminates the participation of the prefrontal cortex. These decisions will be made with the brain stem only (subconscious). The reason I’m asking for your help is that I need participants who have spent an unhealthy amount of time looking at stock charts – thousands of hours – and I was hoping you’d have an idea about how best to reach them. I will share the results of the study with anybody who participates and none of their information will be shared or used for anything other than analyzing the results. I’ve included the link to the test (it takes about three minutes to complete) and would really appreciate any help or suggestions you have for getting it out to the community.

I readily agreed and took the survey myself, and it’s fun. Here’s the link……….. 

Worry Warts

By -

Typically when things are going great, I think about just how low things could go or how bad things could get. I’m going to do just the opposite today, since that f*cking b*tch Janet Yellen has a way of mucking up all my plans, and instead will think about danger points for bears tomorrow (that is, Friday).

I am presently short seventy-three different positions, almost all of which are deeply in the green. However, looking at the ES, it is approaching a supporting trendline that spans back for many months.

0810-es

(more…)

Markets Love Big Round Numbers

By -

Just a “heads up” on the following Major U.S. Indices:

  • Dow 30 above 22,000 (keep an eye on the Dow leaders and laggards for clues to continued strength or weakness)
  • S&P 500 approaching 2500
  • S&P 100 approaching 1100
  • Nasdaq 100 approaching 6000 (has just over 100 points to go, but keep an eye on the powerhouse FAANG tech stocks, which are currently stuck in consolidation mode, for either breakouts or breakdowns)

(more…)

Law 101 Meets Psych 101

By -

Lawyers and Psychologists

Steve Saville has a post out called Don’t Think Like a Lawyer. In the post he notes the following…

“The job of a judge or juror is to impartially weigh the evidence and arguments put forward by both sides in an effort to determine which side has the stronger case. The job of a lawyer is to argue for one side, regardless of whether that side happens to be right or wrong. As a speculator it is important to think like a judge or a juror, not a lawyer.”

While I often talk about the same concept in psychological terms (subordinate ego, bias and automatic thinking regimens in service to one simple goal; being on the right side of markets) the lawyer analogy works as well. Lawyers often argue cases that are lost causes; that is their job. The market and its millions of inputs from man, machine and casino patron alike is the judge and jury because it renders the verdict to any given stance.

(more…)

After the Towel is Thrown

By -

Bill Ackman had a famously bad time with Valeant Pharmaceuticals, which crashed from $263 to the single digits. Last March, having suffered terrible losses for his fund, Ackman “threw in the towel” and dumped his position, prompting even Gartman to chime in.

So did the stock instantly soar higher? No, that would be a little too neat, wouldn’t it? The stock did indeed keep falling for a few more weeks, losing another 20% or so of its value, making Ackman looked like he at least salvaged something out of the mess. However, it soon found support on a trendline that I had pointed out went back nearly two decades………

0713-vrxlong

(more…)

Streetwise

By -

University Avenue in Palo Alto sparkles at night with trees illuminated with carefully-placed lights by the thousands. The street has been around as long as the town, and in the year 2017, it is a veritable Rodeo Drive, lined with expensive retail stores, wealthy citizens, and dreams of avarice. You hardly ever see anyone wearing business clothes here – – anyone so doing would be rightly perceived as an out-of-town rube – – but it is on this street that companies such as Google and Paypal got their start and the recipients of technology riches shop, eat, and gather.

(more…)

Nasdaq 100 vs. Volatility: Be Wary of a Blow-off Drop

By -

While the Nasdaq 100 Index (NDX) is busy making new all-time highs, so is the NDX:VXN ratio (VXN is the Nasdaq 100 Volatility Index), as shown on the following two Monthly charts.

What is different about these two, is that the NDX:VXN ratio has run up against major resistance (the top of its long-term uptrending channel, while the NDX has a long way to go before it does the same.

With reference to the ratio chart, a drop and hold below the 460 level (127.2% external Fibonacci retracement level) could forecast a drop down to, potentially, major support at 380 (100% Fib retracement level plus bottom of long-term channel) on this chart, or lower.

(more…)