I have been reading Carl Swenlin a long time. He keeps it simple and real over at Stockcharts.com. This week Carl nailed it on trend following:
Rather than explaining why the market is wrong, we should be asking, “What is the market doing?”, and acting appropriately. I am, of course, talking about a trend-following discipline. This approach is never perfect, but it is always rational because we respond to what prices are actually doing, not what we think they ought to be doing.
We are in a massive uptrend right now and you need to have a plan both for following the trend and bailling when the trend ends.
This week’s Stocktwits 50 is a good place to start hunting for ideas and new leaders. It was a brutal week for momentum. I felt it in my portfolio. Rackspace $rax and $goog lit me up the last few days. In Google I gave back most of my gains.
The market was throwing some punches in momo land. I took a jab to the forehead and I am on guard.
We hear a lot about short squeezes shaking traders out. I think we’ll be seeing some “emotional short squeezes” occurring. Carl’s comments are timely. Now’s the time to see how good we are with our trend-following discipline. Don’t get emotionally squeezed into (or out of) trades.
I also like what Joe D. (@upsidetrader) said in his 2010 year-end StockTwits TV show. Paraphrasing, he said that as traders we need to constantly change our minds. Never feel bad changing your mind two, three, four times a day.
indeed
The very overdue correction started last week IMO.
FX and gold/silver have already given the signal.