Market On Open, Tuesday 21 January
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Plus ça Change….
by Alex King, CEO, Cestrian Capital Research, Inc
… plus c’est la même chose
The world and its dog is currently trying to work out which stocks are best to play Trump 2.0 based on likely policies, potential tweetstorms, likely goings-on beneath the waterline, and so on. And good luck to them.
My own view is, this is too difficult. Not even the new Administration knows how its agenda will be received by the equity, bond and FX markets on any given day, month or year. Trying to build an investment or trading strategy from the ground up based on how one thinks the market will react to whatever policies end up taking effect and which do not? Much too difficult.
Instead my own view is, there is no new news here. I mean there is plenty of new news in the news. But there is nothing new under the sun as regards investing and trading. A prudent investor and trader would probably scale back their number of positions; would probably reduce the number of binary-outcome plays; and would probably retreat somewhat to index and sector plays, be they ETFs, options or futures.
At any rate this is what I’ve been doing and I at least consider myself to be prudent (that said, which of us considers ourselves to be reckless?!). So far despite all the volatility pre and post the election, pre and post the inauguration, standard technical analysis tools have held up as being useful to find likely levels of support, resistance, reversals and so on.
Technical analysis isn’t perfect - it can’t be. It’s just pattern recognition, nothing more, nothing less. It’s useful to the extent that one practises over and over and over and over, learning that if pattern X happens then it is more likely that pattern Y follows than does pattern Z, but if in fact pattern Z happens (or indeed some other pattern entirely), one has a plan for what to do about it. This is precisely why I like technical analysis - you aren’t trying to work through 4D chess about if oil this then solar that then AI the other … you’re just looking for somewhat predictable patterns in highly liquid securities that can be bought in anticipation of gains, sold if gains are achieved, hedged or sold if the gains look delayed or unlikely. Simple. Anyone can do it if they try.
One of the services we host excels in this discipline. Trading With Van is an incredibly simple service to use. Van trades the Nasdaq and the S&P500 for a living. Just the Nasdaq and the S&P. Nothing else, no distractions, nothing. He posts his trades and explains their logic along the way. He trades long and short all week long and does very well indeed. If you'd like to learn how to make money in choppy markets then I suggest you take a look. You can use the service for futures, simple and/or leveraged ETFs, your choice. Just click here.
Short- And Medium-Term Market Analysis
So, let’s get to work. If you want this daily dose of pattern recognition, and you aren’t yet a subscriber of ourse, you can read about and choose from all the subscription services that include this note, here.