There, I said it.
I’ve been thinking this for a month or more. I didn’t want to say anything for fear I’d jinx myself. After all, my YTD is better than The Fly’s (a first in over 4 years of working with him). What the hell? Trading this market has been like playing in a casino where the house loses 70% of the time.
It doesn’t matter whether one trades mean reversion, trendfollowing plays, or breakouts: Everything has been working in this market. Except for shorting, of course.
This market has been so easy and so boring that I’ve run out of things to research about it. What more can I say about a market that has been on a 45 degree trajectory for the past 5 months? What more can I say about a market that continues to make higher highs, and higher lows? People get tired of reading about the new latest record that is being set by the SPY.
I spent a couple of weeks a month ago trying to find something bearish to write about. I was able to generate one bearish study. Everything else has been bullish. In the comments section of the bullish studies, crickets. Chirp, chirp. Perhaps everyone else is bored as well, or everyone else is pissed off that they’ve been doubting this rally and have not had enough exposure, or worse, has been trying to short it.
It is always important to follow a clear set of trading rules. It is always important to be disciplined. A mistake that I suspect is made by many traders is to only follow rules when the market is volatile, choppy, or generally challenging. “Hey, this market is a bitch. I better follow my rules!” A boring market can lull traders into thinking that rules are not as important, or even unnecessary. Consequently, they make an easy market into a hard market by trading the market they want to see rather than trading the market they have. To put it another way, the market can stay boring a lot longer than you can stay rational. Rules keep us rational, in both challenging and easy markets. While it is easy to rationalize under-performance in a challenging market, it is much less easy to do the same in an easy market.
My suspicion is that rule-based traders and even disciplined discretionary traders will have had an awesome few months or more. I suspect that those without rules and discipline have been tripping over their own biases, second guessing themselves, and generally trading against the best bull market since 1995.
This market IS boring. It should FEEL boring to trade it. If it isn’t boring and trading it has not felt like second-nature, then something might be wrong.
Until we see a lower high and lower low, enjoy the boredom.