Morning Thoughts Friday August 31

Since I last wrote this column on Tuesday August 28 the S&P 500 is down about 0.50% and bounced off the 1400 area yesterday.  After two indecision days Tuesday and Wednesday some selling yesterday was healthy, especially when matched with intraday support.  In short, I still favor the long side here with a first target at 1420 followed by 1440 on the index with first support at 1400 and second support near 1390, although second support is less stable at this stage.  Given how much stocks have run off the June lows however I am merely a few percent invested at this stage and waiting for a better go signal to add to longs.  Some consolidation here is what I am looking for to establish a base from which we may be able to move a little higher still.

Most sectors and stocks I follow look good for some further upside, with one significant exception;  Intel (INTC).  The stock looks weak, very weak.  Given the importance and leading indicator role that the semiconductor group plays, in particular Intel, this is hard to ignore.  For the time being I am however willing to give the stock the benefit of the doubt and consider it an idiosyncratic issue not much related to the rest of the tape.  Either way, it doesn’t make me feel great and I am watching it closely.

Now, because we are only a few trading hours away from a three day U.S. stock market break and plenty of headline risk this weekend allow me to touch on something I find much left out in most discussions about trading.

To be clear, I don’t profess to have a crystal ball or otherwise alien powers to predict movements in global markets.  Throughout my thus far 14 year career as a professional trader I have learned and come to fully accept, both consciously and subconsciously that this business is a game of probabilities.  In short, you win a few and you lose a few but the order in which those winners and losers come is completely random – hence the struggle for many investors.  The difference between a winning and a losing trader is simply how he/she deals with the losses – mentally.  If you know you have a methodology that works then its simply a matter of letting the favorable odds work for you over time and not letting losses get to you.  This latter matter is no simple feat but for the person who is serious about this business is entirely surmountable.

Have a great weekend








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