Apex Near Completion on the XLK, XLP, and XLY

I’m continuing to look at the 20-day MA for the initial reaction in the SPX. I am also looking to see if it may possibly need the help of the 50-day MA, which will bring the market into a flat, neutral range. The latter is a threat to the rally. So far, I see an orderly pullback and nothing that suggests that we go crashing down.

There are a few things that I need to talk about regarding the individual sectors. The XLB, XLV, XLI, XLU, XLF, and XLE are consolidating nicely, which is expected. However, I am focusing on the XLK, XLP, and XLY. Make note that that these three are forming the apex of their respective wedges. A resolution here may foreshadow what is to come in the next few days/weeks.

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Scientists have estimated that the average human makes 50 to 60 thousand decisions everyday, whether they realize it or not. This includes conscious as well as subconscious thoughts. That makes decision making one of the most important things you do in life (obviously). Everyday, you decide between happiness and misery, work and fun, success and failure. You make your own determiniation as to direction, speed, and destination. And, you decide for yourself how you’re going to get where you want to go.

As far as we know, humans are the only creatures on Earth that have the ability to make conscious decisions. Dogs behave as dogs have always behaved, by their nature. A dog does not have the capacity to decide to do otherwise, even though it may have its own quirks. The hive built by bees today is the same design as hives built by bees a thousand years ago. Nature conforms to a definite pattern, within each species, through birth, growth, reproduction, and death. There is little variation.

However, humans are different. They can change. They have the power to reason and think and to use information. It has been said that there is only one point at which all humans are alike and that is that they are all different. The reason is because each person can act independently. The biggest business of any life, then, is deciding what to do next. This is also the hardest thing to do. Why? Because it’s the place where success or failure is ultimately determined.

So what is a decision? By definition, you make a decision by making one side of an argument the victor over the other. To decide is to “bring an end to vacillation.” It is the “termination of doubt or controversy.” To decide means to “conclude” after careful investigation or reasoning. And a real decision implies a degree of firmness that enables you to carry your plans through a conclusion.

How does all of this apply to trading? Trading is all about making decisions. I make split second decisions all day long, some of which do not have the time for “thinking”. If you hesitate, you will lose or lose out on some ridiculous gains. We are not creatures without the ability to make decisions and only you can make them for yourselves. I know it’s difficult for most of you to “pull the trigger”, but trading is all about taking risks. You cannot get ahead without taking them. You must take chances and not be afraid. Are you just going to sit there all day and not make a move?

A lot of people confuse intention with a decision. That’s like confusing a blueprint with a finished house. Almost everyone wants (intends) to do successful things in their lives, but most never get around to it. You’ve heard that the road to hell is paved with good intentions. If that’s true, then the road to failure is lined with billboards of good intentions. A decision is a mental state that is far more advanced and has far greater power than any mere intention. We all intend to make trades, but if you don’t actually make them, then what’s the point?

Make up your mind. Emerson said that “the world belongs to the energetic.” Very few things are as mentally and physically invigorating as a successful day at work (ex: winning like a mofo on your trades). Emerson also said, “Work every hour, paid or unpaid. See only that you work, and you cannot escape your reward. Whether your work be fine or coarse, plating corn or writing epics, honest work, done to your own approbation, shall earn for you the greatest rewards known to the senses.” Honest work earns the greatest rewards of success, but even industry must be preceded by decision.

Emerson might just as easily have said that “the world belongs to those who can make up their minds.”

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Still going higher until we get that exhaustion.

Also, if you are a prospective student and you 1) do not live on the west coast and 2) you are available this weekend, then shoot me an e-mail.

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The most dangerous enemies of success are those that hide somewhere deep in your own heart and mind. Those who say that the want success and yet hang onto the attitude of failure are deceiving themselves. Almost all failure is generated within a person’s inner self, through their thoughts and attitudes. Looking through some history, Aristotle warned Alexander the Great that the most immediate dangers confronting his success were enemies within his own ranks. As you may know, the Macedonian army was rife with disloyalty, drunkenness, carelessness, etc. On an individual level, these actions could have been prevented by having a proper attitude.

Let’s fast forward to now. A few years ago, a survey was conducted by a life insurance company to determine why unsuccessful salespeople failed. Here were the results:

37% failed because of discouragement
37% failed because of lack of industry
12% failed because they didn’t follow instructions
8% failed because of a lack of knowledge

This should come up to 94%, and all four areas are directly related to individual attitude problems. Discouragement is caused by poor mental posture. Lack of industry is cause by a general bad attitude. Failure to follow instructions means you’re just lazy and have a lazy attitude. Finally, a lack of knowledge comes from a mix of everything above. Most of the salespeople failed because their attitudes broke down well before they even displayed their failures through their actions. It’s all about attitude.

In war, morale is the first defeat in any war. One side always loses heart before they are actually beaten on the battlefield. The side that believes in their ultimate failure will fail, no matter what other circumstances exist. A negative attitude almost always starts small and as you cling to it and believe it, it grows like a virus. When this virus gets to become so strong, it will overwhelm you until you break down. Sometimes, the psychological effect is so great that it can actually breakdown the central nervous system.

A good attitude doesn’t come instantly though. It does not come from solving one big problem in your life. It comes from solving a lot of little problems, proving to your mind and others that you can overcome anything. For example, if you are consistently losing on your trades, take it day-by-day and isolate each problem and solve it. You have to train yourself to believe in yourself that you can overcome the difficulty of losing. You will most likely lose if you think that you will lose on a trade before you even place the order.

The quickest way to go from a bad attitude to a good one is through taking positive actions. Theodore Roosevelt once told a crowd of politicians before a major vote in Congress, “If you want to be brave, then start acting brave.” He didn’t say, “have brave thoughts.” He clearly wanted action. You’ve heard that action speaks louder than words. Well, that applies equally to thoughts that lead to success.

You must take action to become better. You can’t make successful attempts without first beginning with a successful attitude, and only you can make that choice.  Suppose that nothing goes right for you, still. Do you quit? Hell no. No matter what happens to you, you can turn the “bad” experiences to your good.

Some people wish they could always have things exactly the way they want. However, suppose you could always have your own way – you would never make a mistake, never be opposed, never know trouble or failure. And…you would never develop the strength that comes from opposition, or the feeling of exhilaration that comes from success. Problems can become your best teachers. Remember Edison? He tried over 5,000 times to make a light bulb that wouldn’t burn out without success. He learned something from each failure until he eventually succeeded. Even Shakespeare knew about failure when he said, “The best men are often molded from their own faults.”

Listen, whether something is a problem or not, it’s all in your head anyway. You have to realize that your life (and trading career) can be whatever you let it be. You don’t have to let every little failure be a total wreck. Instead, tell yourself, “If there’s to be trouble, let it begin here, and let me be the one to handle it.”

Apply these principles to your trading.

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Both the market and my equity curve.

Funny how people perceive my 400%+ return as some sort of asshole display of behavior. Listen, it’s only to make sure that you know that I know what I am doing here. The reality is that I double my money about every 2-3 months and I don’t give a damn what you think. I am banking huge coin and hopefully you are too.

Don’t be jealous. Instead, ask for help and ye shall receive it.

I thought about incorporating swing trading more often but then I realized that I make more money day trading with the limited time that I have, a lot more.  My principle is to make the most amount of money in the shortest period of time. If that’s not your goal, then you should go somewhere else.

We are heading higher until there is 1) buying exhaustion, or 2) if we get a huge unrecoverable breakaway gap down.

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And also, the SPX 1-mo/60-min chart:

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