A comment was posted this morning regarding our market position, and rather than reply on the comments section I wanted to address it as a separate post. It’s a good question this reader asks and deserves an answer. Here’s the comment:

It seems like your positions are “fighting the tape”. I have been fully invested in the market right before the rate cut and have made a phenomenal return since then. I have locked in profits with tight trailing stops. Why fight the tape? Doesn’t the market climb a wall of worry? Don’t most of the total returns for the year come on just 7 or 8 trading days?P.S. I do enjoy your blog and read it daily (even though I am surprised that you have missed this huge move since the rate cut).

Dear Reader:
Thank you for reading our blog. I’m pleased that you enjoy it! We often discuss risk/reward when choosing trading positions and want low risk/high reward. This market environment simply isn’t showing us that “low risk” we look for, yet. When the stats and indicators point in a more convincing direction, reducing position risks, we will take our trades. To have been fully invested before the rate cut announcement would have been gamble, for us. I’m glad it worked well for you, but that’s just not a move that is in line with our philosophy.
We are not “fighting the tape”, we are waiting for a better entry. If this turns into a beautiful bull run to the end of the year (and even into next year) there is plenty of time to take entries. We don’t try to “time” the market, knowing it is impossible to call bottoms or tops. Hindsight is always 20/20 and some people will always look back at trades not taken, then beat themselves up for having missed an opportunity. It’s useless to do this, it’s emotional, and our goal is to help people to take emotion out of their trading. I know of traders who were upset they hadn’t called the March lows, but if you look at the Dow chart, there was plenty of time to participate in that run up into the summer once resistance was broken.
If I’m going to erect a building, I want to test the tensile strength of the steel beforehand. I’m not going to take somebody else’s word for it that the metal is strong enough to hold the rest of the structure. So before I build stock positions, I want to make sure (as best I can) that the market strength is there, too.
I don’t understand why you would think total yearly returns only happen in 7 or 8 trading days. If that were true, then swing trading would be close to pointless. And daytrading would be total futility. Yes, it’s true one may get lucky on a stock’s movement a few times a year. But, we aren’t about trading on luck.
I hope this has answered some of your questions regarding our position in the market, and look forward to more of your comments!