If You Bought Right, Sit Tight

We have arrived at the “sitting” phase of the renewed market rally.

To paraphrase famed investor Jesse Livermore, “It never was my thinking that made the big money….it was the sitting.”

Most of the stocks that will post the biggest gains have already broken out and we have profiled them on our sister site. They signaled themselves to us during the March through May rally. We focused on many of them, scooping them up when the rally resumed in mid-June and haven’t been disappointed. Our latest addition is TNDM, which we discussed on Thursday. But new buying opportunities are likely to be increasingly limited in number during this phase of the rally, which is now extended and obvious.

So what do you do now? If you bought properly, just watch. Or sit, as Livermore averred.

Bear in mind that the best stocks will give you clues about the durability of the market rally perhaps more than the major indices will. Anyone in the stocks we have recommended surely has noted days when the indices were about flat yet their account was up smartly. The market will be tired when these stocks begin to show signs of wear.

So we sit for now, watching for negative clues such as new highs on light volume or bouts of high volume distribution. We hold through earnings and don’t trade out of boredom. You should never consider making money dull and should try to avoid sub-par merchandise for the sake of a quick trade. The worst thing you can do before the rally is over is “lock in a profit” for fear of losing a big gain. It’s the big gainers that often become even bigger gainers.

Nearly three decades ago Tom Petty sang “The Waiting is the Hardest Part.” We wonder if he ever read Livermore?