Note: The chart within is updated from my original article, which appeared November 21st on other media platforms.
When I was young my father would enjoy telling me a fable, “The Scorpion and The Frog.” With Financial Talking Heads debating whether stocks are still in a bull market or now a bear, I hearken back to that tale.
To make the story short: Scorpion asks Frog for a ride across to the other side of a river. Frog is reluctant, saying if the scorpion is on his back he will be stung. Scorpion reasons that wouldn’t make sense, because if he did that they would both drown. Frog agrees and consents. Halfway across the river, Scorpion stings Frog and they both drown.
Moral of the story: It’s the nature of the beast.
Back to the stock market (see my weekly candlestick chart of the S&P 500 below). The nature of a bull market is to take as few investors along as possible. The nature of a bear market is to claim as many victims as possible.
In bull markets there are sharp declines. In bear markets there are strong rallies. The keys are identifying the prevailing trend and keeping your emotions (fear and greed) out of your trading. Following my Complete Game Plan for Trading Success, built on the cornerstones of Mind, Method, and Money Management, can help you be prepared for whatever path the market takes.
Successful speculation is as much a matter of honing your survival skills as it is finding winning trades. Sound money management is often the most important factor in determining success or failure in trading.
I study the character of each day’s trading to determine who is stronger (buyers or sellers) and when and where the balance of power is likely to shift. Approaching our 30th year of publication, I share my picks each week with our great Options Hotline subscribers.
Sarnoff’s bottom line: Think critically and don’t follow lambs to slaughter. Be it bull or bear, don’t be a greedy pig. Be prepared when opportunity presents itself. Don’t chase price or regret missing a trade. There’s always opportunity in options.
All of us at Options Hotline wish you and yours a Happy, Healthy, and Compassionate Thanksgiving!
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