Trading Lessons: Bull or Bear? These Labels Are Useless

Some trading lessons are invaluable.  One of the best is to be agnostic and without a bullish or bearish bias.

As the markets move up and down we often find ourselves positioned in one camp or the other.  Naturally, on the sidelines technically means we are neutral, but often it is ‘bullish with a bias to wait’.  I’m not into labels.  Why?  Because it puts us all in a frame of mind where we have bias, and in this market if you are biased then you lose your quickness and flexibility.

Having a point of view is nice, and sure it’s great fun when we are right.  But that doesn’t always make the money.  Further, that bias tends to put us on the defensive, and what is worse than being defensive in a constantly changing market.  Labeling ourselves bullish or bearish could be a killer move, or could be the choice that causes great pain.  Labels slow us down, especially when the market is not working in our direction.  ‘We have to be right, the market is wrong (temporary insanity) because…’  Sound familiar?

We often hear pundits, strategists, experts and fund managers proclaim their allegiance to a bullish or bearish bias.  Just the other day I heard at least five of these so-called ‘experts’, two were bullish, two were bearish and one could be labeled a hybrid between the two!  If I were looking for a consensus opinion, I was not any closer to one than the beginning of the day.  Supposedly they are armed with far more information than the public, so their pronouncements can become the gospel of the herd.  When it comes right down to it, their ‘guesses’ are no better than any other opinions.

We need to be careful and not listen to the constant chatter and noise when the decision to move our feet becomes closer.  I prefer to let the market tell me how to trade, invest and go at it accordingly.  Our flexibility gives us the opportunity to move quickly and decisively, not being stuck in quick sand – eventually sinking to the bottom.  We have a saying in our chat room that is a constant reminder: We are in the moving business, not the storage business.  This market will not forgive a complacent attitude.

Branding yourself a bear after the SPX 500 has run 230 points is probably as contrarian as one could be, considering the momentum is on the side of the bulls.  That would clearly be a lonely position.  However, markets are still in a bear phase, that evidence is still there as we consider the long term chart of the SPX 500 (see chart).  Could it turn?  Most definitely, and the edge seems to be with the bulls at this time, but the bears may still have a chance.

Are you confused yet?  I sure would be, which is why labels make trading/investing a tough proposition.  Instead, let’s make bullish/bearish decisions, look at the entire playing field and play it accordingly.  If you use charts/technicals for your decision-making process for individual plays then you’re way ahead of the game.