May Brings A New Short-Term Downtrend

I think my recent tendency to over-trade is the result of the success of last year, and particularly early this year when so many of the small, speculative stocks I was buying showed immediate gains, even if purchased when the PMO was near the top of the range. Without realizing it, I am trying to recreate the thrill of this past period. So, it is time for me to get back to the less thrilling but also profitable discipline of patient and thoughtful stock trading.

Last week, I also mentioned that I wanted to be better at letting the market stop me out of positions rather than my tendency to automatically raise cash based on indicators. The reason for this is that when the market starts to chop like it is now, indicators are much less useful and they whipsaw with the market.

So if I automatically raise cash, I have too much cash on hand, it burns a hole in my pocket, and I end up trading without profit. I'm not backing off from the idea of raising cash when the PMO is at the top of the range, but I am suggesting that taking partial profits in order to raise cash can also be done by using stops rather than sells based only on market timing.

Changing topics a bit, here is a look at the TLT chart which had been counter-trending higher. Near the close on Tuesday, I went short Treasuries and the stop will be this overhead resistance line. However, so far it looks like the TLT is just moving sideways.

Below is a look at the PMO for the TLT, and it hasn't yet signaled a sell, but it looks to be close.

Below is a look at the US Dollar. Trying to determine the trend of the dollar gives me fits. I'm wrong as often as I am right, but based on this chart, at the moment, it looks like the dollar retested its recent lows and now wants to retest its recent highs. If this is correct, then in the short-term this could mean that some of the leading inflation-sensitive stocks will pullback in price.

Note to self; most of the money I have made in the stock market over the years is from buying stocks during the short-term corrections, not from active trading. This means patiently waiting for, and then seizing, the right opportunities to buy. It is a really good strategy to make money, so I'm sticking with it.

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Disclaimer: I am not a registered investment adviser. My comments reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, ...

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