The stock market action is slow on New Year's Eve and there is little positive momentum after the gap up open. This is a day for last-minute positioning, which means we will see a surge of activity in the final 30 minutes or so of trading, but during the course of the day it is going to random.
Breadth is very good with more than two gainers for each loser but few stocks are hitting new 12-month highs or lows right now. We have gone from oversold to overbought and further upside progress is difficult. The indices are now trading at intraday lows as I write and there are few pockets of speculation.
While I'm not making any moves right now, I am reflecting on some resolutions for new year. Here are four areas in my trading that I will work on improving.
- Worry less about news and predictions and focus more on price action. This past year has proven very clearly that trying to navigate the market based on news, fundamentals and even technical patterns is extremely difficult. The best way to navigate has been to react very aggressively to changes in price action. Stay focused on price. It is interesting to listen to the big-picture arguments and the theories about why a stock may do well, but price is the only thing that matters.
- Keep accounts as close to highs as possible. I discussed this issue in my column this weekend. Nothing is more unproductive than making up losses so err on the side of limiting them.
- Track setups and watch lists more closely. I am never going to catch all the opportunities that arise each day but if I am more organized and systematic when looking for setups and tracking stocks I will catch more of them. It is too easy to be distracted and to lose focus and I need to work on preventing that.
- Trade bigger. If I manage my trades well than I can trade bigger. If the methodology is solid then the best way to profit is to increase size. Trading smaller is easy because it doesn't cause strong emotions, however, if I'm not feeling at least a little tension with a trade then I'm likely not pursuing it hard enough. This has to be done across the board and not on a selective bases for it to work well.
Those are some of the things that come immediately to mind when I think about how I can improve my results in the year ahead. I have no idea what the market is going to do, but that doesn't concern me. What I do know, without a doubt, is there will be some great opportunities and if I stay focused, I will find them and produce good returns. Bear market or bull market -- it doesn't matter.