No One Owes Us Anything

One of the biggest fallacies that costs traders plenty of money is thinking that Mr. Market looks like this:

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In reality, this is a much better depiction of who Mr. Market truly is:

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In gambling and trading, after losing several bets in a row, most think: “I am really due for a win here.” So, they keep betting or, worse yet, they increase the size and frequency of their bets. The reality is that the market is far from a cute little piggy bank, dispensing $100,000 to happy-go-lucky passers-by. Instead, Mr. Market is always looking to punish you for the slightest mistakes and, when he does not punish you for mistakes, you should start to get cautious.

Today, we saw a sell-off that quickly picked up steam this morning. Thus far, the bulls have been unable to put much of a bounce together. Moreover, we have lost the 1300 support level on the S&P 500. While the temptation is to step in and buy immediately on weakness, or not cut holdings that have breached sensible stop-loss levels, the reality is that no one owes us anything, particularly Mr. Market.

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