The broad stock market has been in “chop mode” for several days.
The S&P 500 has been ping-ponging between 5800 and 5860. The bulls have been trying to press higher, while the bears are exerting their own selling pressure.
Neither the bulls nor the bears, though, are showing much enthusiasm. And the S&P 500 is just above the magnetic pull of its 9-day EMA.
So, I have to stick to the sidelines.
One of the things that happens, though, when I suggest nothing for so long is subscribers get antsy. They want to trade. They want to be in on whatever action there is. And, they’re disappointed that I’m not making many recommendations.
That’s understandable. We want to be active. We want to be in the game. And lots of folks just want to ”do something” even if the risk/reward is not favorable. Even if ”doing something” leads to losing money, they just want to be active.
Their thinking is that taking the chance at making money is more important than avoiding the risk of losing money. So, they want to play the game – even if the odds are against them.
Gambling Doesn’t Work Over Time
That is the gambler’s mentality.
The gambler plays every hand at the blackjack table – even when the count is against them – because they view it as more important to be in the game rather than to be resting on the sidelines.
Sometimes the gambler wins. And, sometimes that gambler influences other folks to play no matter what the odds.
In the long run, though… the casinos make a whole lot of money. That tells us that gambling doesn’t work over time.
I can tell you this…
Every day I step up to the plate. And, every day I’m looking for the fat pitch that we can hit over the fence. And, I’m willing to settle for the off-speed pitch that we can push for a quick single if that’s all we can get.
But, I’m not willing to take a swing at a pitch outside of the strike zone just to try to get in on the action.
I am dying to trade here. I am looking constantly for trades that offer a good risk/reward setup that I can recommend you take and have a reasonable chance for a profit.
But, I’m not seeing much I would put my own money into. And, I can’t – in good conscience – recommend anything to you that I wouldn’t take myself.
So… I’ve been suggesting we stay on the sidelines.
Yes, that’s frustrating – especially since it looks like the market is moving all over the place and there are all sorts of opportunities to profit on the volatility.
What I’ve seen though, from multiple services that are day trading, they’re basically churning their accounts. Whatever quick gains they get are reversed by equally quick losses.
They’re active for sure – probably doing five to 10 trades every day. But they’re breaking even at best.
I can’t do that. I mean… yes, I could, if I chose to. And, we could post all sorts of trades that keep us active but deliver 0% returns when all is said and done.
But why????
Just to say we called the top, or bottom in XYZ stock? Just to say we delivered multiple 100% gains while ignoring the multiple similar losses?
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We Belong on the Sidelines
Nobody is going to get headlines because he said to stay on the sidelines. The stock market history books aren’t going to praise the guy who said there is nothing to do right here.
But, in this environment, the sidelines is where we belong.
The risk/reward setup is horrible for new long trades. And, it has been miserable from the short side. I won’t put my own money to work in this setup. So, I’m sure as heck not going to tell you to do so.
Traders should stay on the sidelines despite the aggressive influence to do otherwise.
Best regards and good trading,
Jeff Clark
Editor, Market Minute