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September 6, 2012 / redman59

Up Days Can Be As Damaging As Down Days

Last night I wrote about how I ignore the subjective social noise of skeptics and people looking for reasons to be bearish.  I know that they are definitely there but I choose to be subjective by looking at charts and price action and more importantly by zooming out.  Looking at the weekly charts of the indices it was hard to be bearish.  You could see that money was rotating out of the $DJIA and looked to be rotating towards risk assets given the performance and “catch up” of the $RUT.  In going through my Reader feed tonight I can see that @chessNwine mentioned this as well in his Weekly Strategy Session , which is always a plus as I respect his market thoughts and observations.  Also on the weekly $SPX it showed that volume increased with the move up and decreased on the move down, a bullish scenario.

Tonight I wanted to talk about the opposite of bearish social noise and that is the bullish social noise that could be seen today on the powerful breakout(s) that we saw across the board today.  These types of moves can also be crushing not only to those that were overly short but to those that were on the sidelines or took profits before today.  All of a sudden traders are posting their profitable trades and it can be hard not be envious.  It can also be demoralizing for those that were on the sidelines and now they felt they missed the move so they panic and buy.

In my opinion, if it wasn’t part of your plan before the day or it is not a strategy that you are accustomed too, then just step aside.  Let those traders that are posting their profits post them and just be happy for them, whether it was real or not.  Be aware that the break out did happen and plan for your next course of action.  I personally have found that the best thing to do on a day like this is book some profits and not watch the social stream as much as I do as on boring days.  I will later go through after market hours and gather the information that was posted during the day.  In a sense I am removing myself from the psychology of the trade/traders and letting things settle down.

So what did I do today?  I booked some gains on swing positions in $CAT and $IBM and I then went for a run.  I have found that getting away from the desk on days of gains like we saw today can be just as rewarding as on days that losses are acquired.  I have found it to be more constructive to my trading removing myself rather than staying at the desk all day and watching the market euphoria or trying to call a foolish market top for the day.  For the record I did miss out on some good gains I would have seen today.  Yesterday I closed out my long positions in $GOLD and in $MOS.  Watching their egregious gains today sucked but I also remembered the reasons why I sold and would do it again.  Needless to say you don’t need to be hero in this market, just follow your plan.

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