5/11 Lost in the Woods

Reflection

As witnessed today, conviction can be a dangerous thing. If proper derisking and steps aren’t taken to mitigate your losses, in this game, it is very easy to find yourself out of money. Plenty of Bears who switched to Bulls as late as last week now find themselves just as much SOL as Permabears hoping for the ultimate end. The key to anything in life is timing and knowing when to play your cards and when to be patient and sit still. It will be the most wrestled with thing of your trading life to know when to flip a position, when to let it run and to cut, and most of those decisions will try to haunt you. You can’t be haunted by anything however. The only thing that must compel you in your trades is new pattern recognition and the insurmountable confidence and hope that you will learn to do it right. Finding new patterns that did not exist before can rocket you to new heights and ultimately that is what we will drive towards today. The review of multiple pattern systems that have been noticed in the markets so far.

But before I jump in to it, I want to elaborate on why CPI did not provide any sort of move. Ultimately right now, it is coming down to Core CPI at 5.55% vs. the Federal Funds Rate at 5.25%. The core inflation percent, which is often referred to as entrenched or sticky, is unsurprisingly sticking around. It is a small rule of thumb that the FFR must be higher than Core Inflation in order for some sort of reversal to begin. For more info on this, see yesterday’s post.