A Few Thoughts About The Recent Price Action

1) On Monday afternoon, I heard the financial media say there was too much risk in holding stocks overnight. If you listened to them, then you probably got scared and sold some of your stocks.

2) If you watched or listened to the price action, you would have seen that volume was light and many leading stocks were barely down or even green on Monday.

3) To summarize my first two points, if you have little confidence in your process, have a bad entry point, or have no conviction in your ideas, then you probably got tossed around. I am simply stressing the importance of shutting out the noise and listening to what the market is telling you.

4) Last week, I wrote a blog post about how the majority of people still hate the stock market. I can’t think of anything more ironic than getting 7 emails telling me “you’re an idiot, we are about to crash.”

5) The price action since early February is the strongest I have seen since Sept-Dec 2010. I view Monday’s decline as a way to keep people in check. The market is never easy and doesn’t just give money away to people. It tends to shakeout the weak hands before moving higher.

6) Shorting has been absolute torture for many market participants. I’ve talked to a few trading friends today (Tuesday) that are miserable because they are short. You can hear it in their voice, they sound completely defeated. There is nothing wrong with shorting, but if you make a little on the short side, you are better off covering quickly because the price action is too strong.

7) There are about 10 stocks that the public ABSOLUTELY HATES because they are “too high priced” or have “high valuations.” $TSLA is one example. I think people are going to be shocked as to how high some of these stocks will go. People continue to hate them and short them, and they will continue to lose money. They might eventually be right about their short thesis, but I still think they are way too early.

Keep in mind that if I am dead wrong about everything, I don’t care. I have NO ego when it comes to the stock market. IF I AM WRONG, I STOP MYSELF OUT AND MOVE ON. Why? Because the market doesn’t care about me, you, my opinion, your opinion, or Warren Buffett’s opinion. It will do whatever it wants. That’s why our only choice as market participants is to focus on what the stock market is actually doing and NOT on what we think it should do. Good luck trading!

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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