Some Thoughts for the New Year

by Ryan Mallory

This is the time of the year in which Wall Street and Talking Heads are fascinated by predictions and outlooks on the coming year. I, myself, tend to ignore them and believe them to be outright foolishness. No one can say with any clarity or level of confidence what the market is going to do or not do, and in the face of adversity, who is going to stick with a forecast that cannot possibly take into account every market variable and condition?

A market is made up with millions upon millions of buyers and sellers, and unless you can take into account each and every person's emotions, predict their decisions, and know the direct result that all the accumulated decisions will have on the market as a whole, then predictions are utterly worthless. I especially love those pundits that try to predict the year's returns down to a single point on the Dow, or 100th of a percent on an overall return.  

My advice going forward is that you take what the market gives you - don't try to get ahead of market direction and try to predict future price reversals; instead follow the trend and base your decisions on the present conditions.

With that said, I figure it might be worth to share some thoughts with you on the new year that kicks off bright and early tomorrow morning... 

• The market is on an incredible ten-month rally that started back in March - the trend is up and that, my friend, is the direction that I will be continually trading in right now; using short-term weakness to load up on new positions, and market strength to book gains.
• Without jumping into the prediction fray, I will say that I am very skeptical of current market conditions and whether this market can hold the rally. Much of the rally that we have seen, seems to be in conjunction with outrageous government spending to indirectly prop up the market and economy artificially. So an eventual major-market reversal (maybe not even this year, perhaps next) seems to be in the cards, that could send the market back down to last year's lows. However, I will not allow this belief of the market's long-term outlook to shape my perspective of the market in the short term.
• While the market continues to trade blindly to the upside, I am fully ready to take advantage of a breakdown in the indices that would confirm a new bearish trend. I have a hard time believing that the market can continue trading for the next twelve months in the same manner as it has the previous ten. So while I don't know "when" or "if" the market will reverse this year or not, I stand ready if it does.

Happy Trading to All in the Year Ahead!!!