Coming Down the Mountain

It's been 9 trading sessions since the Cyprus news broke and the markets reflected this by closing at fresh highs today. Early last week I did a thought exercise and reflected upon the event and what I thought may happen as a result. In the process I contemplate the man from the mountain that Livermore spoke of who was far removed from the daily machinations of the market and received his news days late. So, what would he think receiving today's close a few days from now?  I don't foresee him coming down from the Sierras along Route 49 come Monday with his brown bear in tow making any raids. The Cyprus news according to the market is a non-event.

As a market timer with a set of tools to decide when the market is best suitable for trading the past month has been a little difficult to say the least. I was already on edge and looking for excuses to exit the market so when the Cyprus news hit I figured surely this would be the news that cracked the up trend. It didn't help that I also peruse the writings of other timers who more or less have come to similar conclusions about the state of breadth. Essentially I created my own echo chamber and came to erroneous conclusions.

I recently picked up the new Kacher/Morales book, “In the Trading Cockpit with the O'Neil Disciples” and there was one passage that resonated,

From a practical standpoint, the simple fact that we were able to generate a mid-double-digit return in 2011 during a year where there were zero successful follow-through days proves that the follow-though day is, all by itself, not a critical indicator. It is a contextual indicator, and the greatest analytical skill any investor can develop is the ability to employ judgment in understanding the contextual effects at work with respect to the effectiveness of follow-through days or any other type of directional signal... pg.36

Moving forward one of my goals will be refocusing the energy and effort that I've spent upon breadth and move towards better understanding of the context of the market at a given time by orienting myself through set-ups.  Regardless of the market environment there will always be an opportunity.   For the near future I'll be spending much more time on market mechanics and analysis, as well as my tactics and strategy and submitting to uncertainty.

One of the major drawbacks I've experienced through not submitting to uncertainty and having preordained outcomes to news specific events is that it has narrowed down my focus and prevented me from looking for opportunity in the market place and signals to trade.  All too often I caught myself thinking, "Why am I not in that stock?" When I started to actually answer that question honestly every single time, to my surprise I've actually found myself in a few of them.