Further Reflections On The Bull Market

Stock, Trading, Monitor, Business

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"I can wait without having a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary. I have been short one hundred thousand shares and I have seen a big rally coming. I have figured that such a rally as I felt was inevitable would make a difference of one million dollars in my paper profits. And I nevertheless have stood pat and seen half my paper profit wiped out, without once considering the advisability of covering my shorts to put them out again on the rally. I knew that if I did I might lose my position and with it the certainty of a big killing. It is the big swing that makes the big money for you."

– Reminsences of a Stock Operator (1923), pg. 70

Thursday was the single worst day of my investment career. I lost more money in one day than I ever have before. And it didn’t phase me one bit. Why? Because I’m still extremely confident that my portfolio is aligned with the primary trends. Reactions/corrections are inevitable, but they are impossible to time perfectly.

In fact, trying to time every wiggle in the market is a recipe for losing one’s position and missing the big move (see “Partridge: It’s A Bull Market You Know”, Top Gun Financial, April 7). And so – like Jesse Livermore in the epigraph above – I just sat tight, confident that all of my losses would be recouped in due time.

In “A Secular Bull Market In Commodity Stocks” (Top Gun Financial, April 13), I wrote about three of my commodity stock positions: Freeport McMoran (FCX), Steel Dynamics (STLD), and CONSOL Energy (CEIX).

STLD reported Q1'22 earnings on Wednesday after the close and FCX reported earnings on Thursday before the open, so Thursday was the session in which the market reacted to their reports. While both reports looked fine to me, FCX got whacked by 10% and STLD faded 7% from its morning high to finish up only 2%. CEIX was also down 10%.

Some traders would accuse me of a failure of risk management. I’d accuse them of overreacting to a single session. When you’re in the right positions, the trick is to sit tight and let them work for you, not selling into strength or getting panicked out into weakness, like Thursday, before the primary trend has run its course.

I’m always willing to change my mind if the evidence changes, but nothing in FCX’s or STLD’s reports suggested to me that anything fundamental has changed.

I also own large positions in the precious metals miners ETFs GDX, GDXJ, SIL, and SILJ. Each of those ETFs was off by about 5%. According to the technician Michael Kahn in the tweet above, the recent action represented a false breakout and a trend break. I assume this means that prudent traders should sell, in his opinion.

However, from my standpoint, nothing fundamental has changed since I wrote “The Case For Gold Now” (Top Gun Financial, April 9, 2021) a year ago. Despite some lines technical traders have drawn on charts, I’ll just sit tight. It’s a bull market, you know.


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