Big Picture Breakdowns Happen, Just Step Aside and Let Them

As the famous saying goes "rookies mark the open and pros mark the close", we got our answer at the close of the end of the week with the SPY closing down almost 4% on Friday bearish engulfing right at a somewhat significant short term pivot low. 

Now the collective thinking from most traders or at least those that I have been talking with is the best case hopefully out come. Where we shake out 410, maybe even push down and test 400 that has successfully held up for more then a year now and reverse back higher. 

In the short term, that could most certainty happen as when things look the most bleak are often when you can find great deals. As we saw this happen in March, however it can be hard to remember. 

In March it seems as if we were destined to roll over and at its worst, there were deals to find as the market found its footing and ripped 12% higher. 

This time around, that we are back at lows again, I am not sure we will be as lucky, however I also don't feel this will be one of those breakdown that we just drop like a rock to 360. 360 in the SPY is the measured move of this breakdown that no one really wants to talk or think about. 

But why? If your active account is in cash, who cares, SPY 360 or SPY 720 means no difference to us. 

From a long term standpoint, if you are dollar cost averaging weekly or even daily, that's great, you will take advantage of the drops and benefit from it when it turns. If we are investing long term, its for the long term, not needed for next Fridays dinner tab. 

It can be easy to get angry or frustrated with the market, but that is only because you want the market to do something other then what it wants to do which is a one sided fight you are rarely going to win. 

Instead of trying to fight the current and exhaust yourself just follow it and understand that there will be rocky times just as there are easy times. 

This weekend, I was talking with a prior member, just checking in to see how he was doing. His outlook was impressively negative, he stated "its not a great environment for crypto, stocks, FX or real estate." Anytime I hear this, I already know the person has done nothing further then a brief glance at any, SPY is down, market is crap, research is done, type of mindset. 

I wanted to poke a bit further to show him his mindset was flawed, so we dug deeper, he went on to explain that he was only investing for the long term buying the broad market at specific levels based off what the FED was doing and based off the information he was getting from the 4 podcasts that he listened to. Among his charting which looked like a 4 year old went to town on his daily charts with a 64 box of Crayola crayons.

During this exchange, all of the work (or lack there of) and his plan of holding for 3-5 years completely contradicted each other. After he was done exhausting himself with this grand and made up theories, I asked a simple question. "Did you outperform the market last year? (22% return)?"

After all that explaining, the answer was no, a big fat no, not even close. He listened to all these podcasts, listened to all the Fed meetings and sat on the sidelines waiting for all his starts to align while he under performed.

Where if he simply just stuck to a simple plan, all that time, energy and emotion invested could have been invested anywhere else with a much better ROI.

The more you can remove your own thoughts and feelings from the day to day action of the market, the better you will be in the long term financial and mentally. If the market drops, who cares, if the market rips, (good for us long) but also, who really cares. If you want to be apart of the 100% run up in 2 years, you have to be willingly and open minded to expect the retracements that always come. 

And the bigger the retracements, often the bigger the snap backs. Be patient, stick to simple plans and do not let the markets performance for better or worse control how you think and feel. Its a one sided relationship, just enjoy the ride for better or worse. And if it is really bumming you out, let me know and I will politely splash some cold water on your face before you do something rash. 

                                                                                          

From Bennett

Nasdaq 

Mid Caps 

We started a separate group for Alpha members with a focus on long term investing and increasing weekly savings. If you would like to join this group, all that is required is you have an M1 account. You can send me a screenshot of the account to be added. If you need help setting the account up set a time below and we can get you started with as little as $100 in under 15 minutes!