You Need More Than an Umbrella in This Storm

On July 23 (when the Qs were trading just over 50) I was warning of a pullback coming (see archives), I was looking for a target near 48.50 and the market has obliterated that target. As I often point out, targets are good for giving us an idea of where the market could potentially go, but only price action matters. It is more important to listen to price than anything else. I have said it hundreds of times that the only thing that pays us is price, price is all that really matters.

Yesterday, I had one guy email me asking how I could be so calm when prices were imploding and he was losing so much money. My answer to him is that I listen to price and price has been screaming at us that there is a serious problem with the markets for weeks, why was he just recognizing that? Once the 48.50 level was reached I warned that it was not time to buy, but that aggressive and disciplined traders could find good opportunities in the increasingly volatile environment. I also suggested (and have emphasized numerous times over the last 3 weeks) that cash was the best position for the majority of particopants, apparently the emailer wasn’t reading back then.

I have also been accused of being “too timid” in this market. Timid is a word which implies weak, that is not a word to describe my market stance. A more accurate description is conservative. That’s my nature, I’m not a big risk taker and I do not apologize for it. It is probably the biggest reason I have NEVER had a down year in over 15 years of trading. The reason I am taking the time to explain this is so you can better use the information I provide. On Monday I said it looked like the double inverse Qs (QID) should reach a target of 50.00 (they were trading at 46.20 at the time) today that target will be hit. That is not timid, that is good information that I hope you have profited from.

No one knows where this market will go, but the trend is lower and I will continue to obey trend and when the trend gets as extended as it is now I will be looking for the possibility of short term reversals. I will not be alerting readers to those plays because they are VERY HIGH RISK and not suitable for the majority of market participants. Continue to trade conservatively, fortunes can change hands quickly in this enviornment but only the disciplined players will hold onto them, DEFENSE WINS THIS GAME!