In the stock market, it never pays to be too negative during tough times. Preserving mental capital and refraining from getting discouraged will not only make you feel better, it will help your performance.  While this does not mean the investor should always be heavily long, it does mean that they should be focused and ready for the next uptrend. The savvy investor accepts the fact that consolidations and bear markets are just part of the game.

Amateur traders often sulk about the idea of a down trending or choppy market, tuning out and thinking, “I will return when the market condition improves.” The problem with this faulty mindset is that the market does not make it obvious when it is turning. Instead, it tries to frustrate the retail investor, while bad news continues to hit the mainstream news. Missing this early stage in the bull market is one of the big faults of the inexperienced investor.

The veteran combats a negative mindset by waiting patiently, fixating on the notion that that the next great trend is always right around the corner. Knowing that bear markets are opportunities, rather than misfortunes, they continue to be laser-focused on the market, constantly sharpening their watch lists. Realizing that the beginning of the market is where the meat is, they know that it is vital to get their hands on low average cost stock.

Looking at a long term wall chart of any of the major U.S. indices shows why it is important to not be a perma-bear. The trend is apparent: it goes from the bottom left of the chart to the top right, with pauses for bear markets in between. Having a positive attitude, fresh watch list, and open mind can be the difference between a so-so year and a great year. 

The market will inevitably try to shake out weak hands before moving higher in an uptrend so you must always be ready in the beginning stages. Protect your mental capital and stay on your toes, because history tells us that the next great bull market is on the way, and it could change your life.


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Best Returns,


Andrew Rocco

The MarketSmith Team