The Short-Term Trend Is Up

It looks like we got a new short-term uptrend this past week. 

 

The downtrend in December didn't do much to refresh the market momentum as shown by the PMO which only pulled back by a bit, although it was a 4-week downtrend which is usually a decent amount of time for a short-term pause. So maybe this means this short-term uptrend will be a bit choppy similar to the previous downtrend? I would feel better about the risk-reward if the PMO had been pulled lower in this chart. 

 

One last thing. The new year is a good time to reflect on what worked and what didn't in the past year so that you can do better in the coming year. Last year, I did a decent job admitting when I was wrong and getting back in synch with the market. But I did a poor job of sticking to my own trading plan. I lacked discipline early in the year.

This coming year I won't forget how good it feels to just admit a mistake and correct it quickly, and I will also stick to my plan. Why deviate from a good plan? Particularly one that is as simple as mine? Raise a bit cash into market strength and deploy cash into market weakness but only after stock prices start firming up. 

Outlook Summary

The short-term trend is up for stock prices as of Jan-06

Contrarian sentiment is unfavorable for stock prices as of Nov-14

The economy is in expansion as of Sep-19

The medium-term trend for treasury bonds is down as of Oct. 10 (prices lower, yields higher) 

Strategy During a Bull Market

  • Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends
  • Buy small-cap growth-stocks on breaks to new highs in the early stages of market trends
  • Reduce buying when the market trend is at the top of the range
  • Take partial profits when the market uptrend starts to struggle at the highs

Trader Discipline

  • Don't be afraid of corrections because they are opportunities
  • Never invest based on personal politics
  • Take pride in sticking to the trading plan
  • Don't give in to fear, greed, or anger

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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