Get Your Ego Out of the Way

It is May option expiry today, and the market was up 5 of the last 7 years.

Shawn Adams once said "The CROWD is always wrong at market turning points, but often times right once a trend has set in. The reason many market fighters go broke is they believe the CROWD is always wrong.

There is nothing further from the truth. Unless volatility is extremely low or very high one should think twice before betting against the CROWD".

At OEX we often play the edges, as we watch the bias build, and when extreme overbought or oversold conditions apply (7 to put or call) or when whipsaw and volatility are taking over the market.

We saw yesterday as a likely "reaction" day to an oversold consolidation, as we were potentially hitting market bottoms, but also saw the potential of a larger downside if FEAR built.

"I measure what's going on. I adapt to it. I try to get my ego out of the way. The market is smarter than I am so I bend."

Martin Zweig, Winning on Wall Street

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I had an interesting dialogue with a new Level 3 subscriber, a Libertarian, who has "evidence" that Obama may not have a legitimate birth certificate, and evidence that he may not indeed be the U.S. citizen that he is.

This gentleman is articulate and could send information that would help "cast reasonable doubt" to any educated American.

From this a lesson can be learned about the market.

1. It is quite unlikely that our President in vetting has a false birth certificate, but even more likely that it will be "investigated," as he has been elected President.

2. It is unlikely anything will be done about it.

Thusly, this is a situation that I see as "what it is, and not what should be". This gent, we'll call him "L", believes a wrong is a wrong, and that this is horrible. He may be right. But, what it is, and it will be this.

I always investigate the odds of "what is" changing to "what should be." There are many times that "what should be" can occur from "what is" when enough people get behind something, and agree to it in principle, and make it right. There are also situations that are "what is is" and it makes no difference in any way what is discussed, as it will not change the situation.

As traders it is critical we do not let "what should be" influence "what is." It is more imperative that we remain suspicious of the market, as the psychological beast that it represents of "the common man," as Wyckoff points out, but more so as we recognize that analysis of financials is not the same as it was 10 years ago, and that stock market movement today is seldom on fundamentals, and that there are fewer fundamentals than we may have known. Citi is a superb example.

The Dow moved to a theoretical high of 8400 before 2.30 p.m. yesterday. Study our Dow projections today, as we're showing a few more s/r lines that could hesitate the market.