Another Week Done – Looking for a Breakout

It’s Friday and the markets are waiting for news on the jobs report, but do these numbers really matter? Overall the answer would have to be yes, however what about today? Isn’t that what it really comes down to? The traders want to know the immediate impact and others want to see how it fits into the bigger picture. Remember it comes down to perspective when talking about most issues in the market. Therefore, my perspective is the number will matter only if it is out of bounds. Meaning not reasonable to expectations. The estimates are 80,000 new jobs and if we are in the 60-100k range attention turns back to the fiscal budgeting issues in Washington DC. I am not sure there is much more that matters currently based on the recent trading activity.

Thursday started out interesting with the spike lower in Apple, but ended up as nothing more than a boring day. The indexes produced small gains and held support across the board. The sectors we discussed relative to the rotation of leadership remained in play. Today we focus on breakouts. Will there be enough in the jobs report or other areas to push us through the current level of resistance. If yes, we take the entries posted on the Watch List, if no we enjoy the weekend.

The S&P 500 index needs to clear the 1415-1430 range on the upside. That would give the opportunity to return to the September highs. Finanicals, technology, Consumer Services and Industrials have been the leaders the last week on the rotation we discussed in last nights notes. Watch for them to continue to lead if we go higher. One day at a time is the theme and today is just another day in the process.

Today I am speaking to a group on the┬átopic of keeping it simple. I believe this is one of the most important things for traders and investors. I love to speak on this topic because it keeps me centered on simple. Like you, I struggle with wanting to make it more complex than it needs to be. One saying I learned from reading Peter Drucker’s books is the concept of Effective vs Efficient. Effective means┬ádoing the right things,┬áand Efficient is doing things right. When it comes to money management both apply. You want to spend your time being both effective and efficient as you manage your money.

That is why you want┬áthe process of developing and implementing your trading strategy to be simple. It will allow you to be both efficient and effective in implementing your strategy. In speaking with an investor this week, he was questioning the entry process on a trade after he bought the position. What he was struggling with was being effective… doing the right thing. When the real issue was efficient… doing things right. Did you follow your strategy for entry, was my question? Yes, was the answer. That means he was disciplined and followed the strategy laid out, now let it play out according to the strategy. Don’t apply the effective part of the process in the middle of a trade! Apply that after the trade is over. Make your strategy adjustments later not during the trading process. You will make yourself a psychotic. He wanted to right versus doing the right thing. You can only control doing the right thing. Being right is matter for the markets to determine. After the trade is complete you can work on the refining the strategy to make it effective.

As a trader and investor we have enough challenges with the market without over complicating the issue. Take time to develop an effective strategy that works for you. Then implement your strategy with efficiency.