What would you buy now?

Seriously?  Is that a question that we, as self-directed investors should have to answer. Yet the question is asked everyday in almost every financial media outlet. And most of the answers lack depth and sound reason. Moreover, the probability of choosing a successful stock is always 50/50. Why do you think monkeys throwing darts at the WSJ stock section performed almost as well as the professionals. Remember, it's a game that is controlled by marketing. Think about it. The message is so powerful on the major media outlets that they, the media, actually make you think the financial professionals that grace their airwaves and their respective companies can outperform the market. Yet, look at the facts 

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Well, I already made that mistake. 1.9% lower. Check out my post from last Tuesday.

But, 1.9% lower really isn’t that far. Especially if you consider all of the bearish indicators that currently reside on  a sentiment and technical basis.

I use very few indicators. I am a strong believer in the linear regression of time and price.  You know, mean-reversion,  bell curves, simple overbought/oversold indicators. Simple, logical, intellectual and more importantly mathematically sound indicators that are the first step towards long-term trading success. Emotions are nonexistent. Time and price determine my parameters.

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I came across a great article on the one bad trade syndrome. Several months ago, Slopers were privy to a real-life blow-up in which a trader essentially risked all of his trading capital on essentially one trade(disregarded the importance of position-sizing). I want to make sure that I never make the same mistake. Currently, my positions are teetering on max pain (stop-loss). My outlook remains with the pullback scenario that I have mentioned repeatedly the past few weeks – short-term bearish.

Check out the article - All it Takes is One Bad Trade

Don’t Be a Hero When Trading Options

Options trading seems to create a “get rick quick mentality” that attracts the “speculative gamblers” out there. To me this approach seems short-sighted, unless that is your goal and you are willing to take the risk. I prefer to take the “long-term” approach that attempts to beat the market over an extended period of time. Admittingly, I “go for the gold” sometimes and place a highly speculative trade. But those are few and far between and I would never allocate a large portion of my portfolio to a trade like this. It is just too risky for my blood after what I have experienced as a trader. Take the loss and move on. Think in terms of probablities. Use a scientific approach. Losses are a cost of doing business. It is how your account compares to the benchmarks after a long-period of time that defines your success. Any Joe options trader can make a bundle on a trade. It is how Joe performs over the long-term that defines his success.

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What is there to say that I haven’t said already?

If you were not privy to the stats that I  provided last week by the wonderful sentiment analyst Jason Goepfert of Sentimentrader.com here you go:

Starting around the 2nd week in January, stocks have had a consistent tendency to weaken.  Or at least not show much strength.  Especially technology.

I don’t want to hammer on this too much.  Seasonality is a tertiary indicator at best, and can easily be overwhelmed by fundamental developments, technical breakouts and changes in sentiment.

The performance of various sectors since the day honoring Martin Luther King, Jr. became an exchange holiday in 1998.  The performance of QQQ was positive only 1 out of 11 years into the end of the month.

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