Saturday, January 31, 2015

Week In Review (1/26/15 - 1/30/15)

This week and all of January for that matter provided a continuation of the volatility that dominated the 4th quarter of last year.  4 out of 5 days featured 1% intraday moves on the S&P.  From a simple price chart you can see the index traded in a sideways chop for the entire month.  We laid the VIX at the bottom of the to show how, unlike other recent periods, volatility has been able to sustain a more elevated level.  All in all, until we get a confirmation of a trend out of the S&P's current range a strategy based on buying strength or selling weakness will remain challenging.

Another developing worry is the potential giant topping pattern in the broader NYSE Composite. Since the index's high last July, it's made a string of lower highs coupled with some waning breadth indicators.

We wanted to share a nice post from Crosshairs Trader about the current chop.  The message in the diagram below is simple:  when the market enters one of these volatile, rangy periods it's critical to focus on positive habits while recognizing and hopefully avoiding negative thoughts and influences.

Many investors, particularly when they're struggling, will go looking for the next "best" thing.  David calls this the magic genie lamp expedition which is genius and so very true.  Successful traders develop habits that focus on process and knowing that as long as they prudently manage losses that better times will be ahead.  There is no one strategy that works in every market.  Right now, many macro trend traders are making a killing on the huge currency and energy trends.  While most momentum traders are having a difficult time.  Being patient and confident in your process while waiting out the bad times is what distinguishes good traders from the pack.  

Here's a look at some commentary and links that caught our eye during the week:

-A look back at seasonality and historical January performance

-A timely piece on investor psychology from Josh Brown given our Thursday post.

-You'll rarely see us quote Zero Hedge but the notes on this S&P 500 chart are pretty telling...

-And Charlie Bilello at Pension Partners always produces solid market observation and commentary.

Have a great weekend!

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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