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Rev Shark:
Don't Get Caught Up in the Future
1/5/2006 9:20 AM EST
"A life uncommanded now is uncommanded; a life unenjoyed now is unenjoyed; a life not lived wisely now is not lived wisely."-- David Grayson
We have started off the new year with some impressive action and many of us are inclined to be skeptical and questioning, and uncertain about how to deal with it. Many investors have a hard time living in the moment. They always want to anticipate and what will come next and don't concentrate enough on what is right in front of them.
We have some excellent trading action, the indices have shaped up, and the technical picture looks better. Enjoy it while it lasts because it isn't going to last long. Make money on the upside today and worry about the downside when it actually starts to occur.
I preach all the time about the dangers of being overly anticipatory because I often see folks miss out on opportunities that are right in front of them when they contemplate what will happen down the road. Being anticipatory allows you to move very slowly and to be indecisive because you are always looking ahead. For some people, such as big fund managers, that's a good idea.
But the small individual investor who is trading with limited capital handicaps himself greatly when he sacrifices his ability to react to a changing market. If you have the ability to move quickly, why squander it by acting like some elephantine fund or market strategist? Trade what is in front of you and be ready, willing and able to hit the sell and buy buttons with conviction when the time is right.
Right now the market is acting well, which may simply be a function of some seasonality and the beginning-of-the-year games but it doesn't make any less real. The profits that come when the "misinformed" bulls are active are just as real as those that come when the "astute" bears are enjoying a downtrend.
Although I strongly believe that individual investors are better served with a reactive approach to the market that doesn't relieve them of the obligation of practicing good money management. Good money management means taking some profits into strength and not simply sitting there when the market ramps. The goal is to make sure you preserve those profits you are racking up, and that means you find a way to lock in gains on a regular basis as well.
We have a mixed start on the way. With the exception of Wal-Mart (WMT:NYSE), the retail sales numbers look OK. Oil is down a bit and gold and metals are taking a hit. I see some downgrades on the wires as analysts get busy after this flurry of upside action. Don't count out the bulls yet -- they have the wind at their backs and it's their game to lose at this point.
Position: No positions in stock mentioned
