The Purpose of this Market is FRUSTRATION

Why this market is made to wear you down and bleed you out

I’ll admit it. I am a bit frustrated. Every weekend I sit down to do my market overview…no changes.

Then I go to look over some of the stocks I am watching and look through my list of potential stocks to buy or short…no changes.

So, I thought it would be a good time to point out the real purpose of this bear market — to drain all the excitement out of trading, especially for new traders, and get everyone who isn’t fully committed to trading professional to quit and never come back.

Let’s dive-in to HOW the market is doing just this — and how big money (the driving market force) is currently checked out, on the sidelines, and waiting for major economic changes (or the end of summer vacation in the Hamptons) to happen before getting back in.

Frustration #1 — The Long Bias — Failing Breakouts

First of all, I think most everyone that trades has a long bias. And most of us, especially if we are new, have more experience trading in bull markets vs bear markets.

I mean, we just had basically a year and a half of massive upward bull market movement, we were stuck inside of our homes studying stocks for a good portion of that.

And, if we zoom out, the bull market trend has been intact and strong since 2009.

2008-Present (Weekly)

Most of us want to go long, but the Fed is pulling liquidity out of the market, and raising interest rates, two very massive headwinds for long biased traders.

So, much of the volume of the market has stepped aside, and it is waiting on the sidelines.

Failing Breakouts

If you trade breakouts, and no big money is there to back you up, then those breakouts will fail most every time.

I have been seeing the majority of breakouts come right back. If you are a good short term scalper, maybe you are making a couple dollars, or breaking even. But it’s safe to say, breakouts are not working near as effectively as in a bull market.

Frustration #2 — Shorting is Hard, and It’s Late

Ok so, we can’t do long breakouts — what about shorting? Is it a good time to short?

Well, maybe. I mean if I had to choose, I would be choosing to go short here. But the majority of the strong short candidates, the ones that would go from hero to zero, aka the big speculative stocks from the previous bull market, (RIVN, PTON, DKNG, AFRM), the stocks that would have offered you clean cut short opportunities with little risk of chop — they already have passed.

The Many Easy Entry Short Opportunities (DKNG Daily)

Their time is gone.

It’s very hard to find good short opportunities in this market, especially if we don’t get a big rally. And, then, what makes you so confident that you will short the rip instead of seeing it as a bull market reversal confirmation? It’s so hard to tell when that time comes!

Let’s look at where you could have tried to short SPY.

Basically, because of these bear market rallies, every SPY (SPX) short would have put you in a pretty big loss at some point.

Sure, there are certainly ways to play this that worked. I am not saying that there isn’t a way to do this correctly, especially in hindsight. But the majority of these plays in this market, the ones that aren’t already beaten to death, will follow the SPY generally, and so getting short at the right time is hard.

And it can cut you up, and cut you up, and continue to cut you up. Chopping your portfolio to death with losses.

It’s frustrating!

Frustration #3 — TIME

The last frustration here is time. I think a lot of us are feeling like this is taking a long time. It is. And that’s what the market wants.

Think of how many traders got bashed up in 2001 crash.

931 grueling days of downtrend.

That’s the toughest one for a lot of us to swallow. NO APPRECIATION. No market growth, for three years.

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What Can We Do?

There are things you can do…probably.

Going short on rips? May work.

Looking at commodities, forex, other areas? May work.

Day trading or changing your style? May work.

But these are not easy. Personally, looking for good “sell the rip” entries is something I am still doing. I was short earlier, but I got caught in a bull trap, and it did some damage. And I realized I may know how to buy in a bull market and make money, but I have no clue how to make money in a bear market. And it may take me some time.

But here is what you can also do. Remember, a lot of people are losing money. And if you are in cash, or mostly in cash, you are in a GREAT position. Every time the market goes down more, the suckers are stuck and lose more money.

Remember this, YOU DON’T HAVE TO DO ANYTHING AND YOU ARE WINNING.

If you are prepared to play this market when it gets good again, you are in a dynamite position.

Wait for the Good Pitches

I hear so many of these top tier professional traders saying they are in cash, they are waiting, that we don’t have any clue where this market will go, we don’t know how the Fed taking money out of the system looks, this is unprecedented.

This is the time to sit back.

So use your time to study. Read. And get some rest and focus on other projects outside of the market.

Put a few hours in a week, or on the weekend, and keep looking for opportunities and keep your head in the game for when things get better.

They will get better.

But don’t let this market cut you up, give you FOMO, and milk your emotional and mental brain power.

It isn’t worth it.

The pitches all suck, and we need home-runs.

Wait till the pitches get better.

Good luck out there!

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