Bull Market – or BS Market?

I am not an economist (although that was one of my majors in college). If I were an economist, I would not be in general agreement with the famous economist, Lord Keynes, whose ideas seem to dominate the current crop of world central bankers. I would likely be in the group that is referred to as the Austrian School of Economics. Their thinking makes me more comfortable as I consider myself to be pragmatic and desire only essential complexity. Things should be as simple as they can be.

This past week in the markets have reminded me of the one thing that Lord Keynes said that I completely agree with – “the market can stay irrational longer than you can stay liquid” – or something to that effect.

The S&P has risen consistently for several consecutive days, while the fundamental data has continued to come in negative to marginal at best. Because my bias was to short this market, I have not had a very profitable week. The market seems to be moving upward in spite of poor data to support it. Irrational? Exuberant? Yes, in my opinion, both of those and more.

It seems to me to be a bull market supported by BS. But I am just one little guy, and I do remember what Lord Keynes said. I also remember, my friend, Dr. Alexander Elder, phrasing it another way, “the crowd may be stupid, but they are stronger than you are”. So what is the lesson for short term trading here?

Don’t let your emotions take over. Select your trades according to your system and take the trade in either direction if the proper setup is there. I have written about this so many times in the past that I am ashamed of my conduct such as this past week. I should have made many profitable trades, several of which should have been long trades. Instead I sat on my biased ass and let the market take me for a few small losses from short trades that were marginal – at best – measured by my own system of trading.

So the lesson here is simple – it is not enough to KNOW what to do – you have to DO it.

A good trading system’s primary justification for existence is to TAKE THE EMOTIONS out of making the trading decision!

I have a very high percentage of winning trades when I religiously follow my trading method. But I love to tinker – to experiment – to try to outthink the market. That may be part of my nature – and it may be fun – but it is not part of my trading system. Sometimes I wonder if I will ever learn to follow my own advice!

In the final analysis, my trading method is designed to protect me from the market. So whether it is a Bull market or a BS market shouldn’t matter – for those that follow the system.


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