Err to the Long Side

There’s a lot of hand wringing amongst traders. The market has been difficult to trade and refuses to correct, except for occasional brief ugly incidents that scares longs and emboldens bulls, only to leave the former regretting their selling decisions and the latter ruing their shorts.

But we have a bull market on our hands and it needs to be respected and given the benefit of the doubt. Today’s market action should make that apparent.

In a nod to the bears we will point out that the NYSE traded higher on lighter volume. But we must also note that volume was above average. And the NASDAQ was simply stellar with no equivocating: superb volume and new highs for the year.

One of the unfortunate undercurrents of the market is that it seems to go up as the dollar goes lower, and notably lower it has gone the last several days, breaking key support levels. And to underscore the point about the dollar gold has taken off and appears to have launched a significant move that will take it to all time, though not inflation adjusted, highs.

Why is this unfortunate? These are signs of nascent inflation. The stock market isn’t going up as much as it is being debased by a lower currency.

But while this is a fine argument for salon parlors and the economy might have plenty of roadblocks at some date in the future, we are in the business of trading today’s market for a living, and not overthinking or having to resort to making excuses for having just missed a terrific move. The bottom line: a rising market combined with the long positions we have posted on our companion blog have paid well the last several days, no matter the reason.

There may well be retrenchment ahead. But the clear message of the market is to widen your stops and stay invested until the performance of leading stocks tells you to step aside.