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A few weeks ago I wrote part one of this newsletter, if you missed it you can read it here.
http://www.easysharetradingsystems.com.au/products-and-services/archive/listid-1/mailid-136-probability-does-not-support-the-fear-of-a-major-correction
The market volatility has continued, which is to be expected at this stage of the bull market cycle. In my opinion the jury is still out as to if we have started a bear market or not. My opinion is “don’t know” which is perhaps not want some want to hear, but that mindset has served me well over the years.
When I look at the influential US market I see uncertainty and indecision. Some indexes like the Dow Jones and the SP500 look like they have started a medium term downtrend, yet others like the Russel 2000 and the Nasdaq look like they have not. So it’s sort of a 50/50 bet at the moment if the markets are down trending or not.
Some commentators are suggesting it’s time to short (sell with a view to profit) the market, I take my hat off to anyone courageous enough to make a call like that, my opinion is it’s too early, because we “don’t know”.
Some traders (like myself) adopt a Zen philosophy to their trading. The technique of “don’t know” sounds silly to our conditioned and often rigid minds. However it’s simply accepting that sometimes we don’t have all the answers, and that often the best approach is one of being with what is happening, as uncomfortable as that may feel. When uncomfortable feelings arise, not just with the market but with anything, the impulse is to go into action or control mode, to make ourselves feel better.
Successful traders develop the ability to “be” with what is happening rather than reacting.
Being with what is happening can mean sticking to your system, and not panic selling because the markets are having a medium term pull back.
Looking below at a longer term (monthly) chart of the Australian market it shows a steady uptrend. Sure it could pull back some more but the price action doesn’t appear to be showing a lot of concern here. Well not yet, and that’s the psychological challenge, to not concern ourselves with a future that may not happen, because we truly “don’t know” what’s going to happen.
To convince you of that philosophy, cast your mind back to just 5 years ago, think about what the market has done in that time, and could you have possibly known or predicted it? The Trump election, short term sell off and then massive rally just one example of unpredictability. How much better could you have performed in the market by adopting the “don’t know” attitude and sticking to a simple system with easy rules?
“Don’t Know Mind doesn’t mean stupid. We fill our minds up with all this stuff, and it gets stale and dead. Not knowing is what opens us up and comes alive"
Zen Master Bon Soeng.
Until next time
Peter
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