Justin’s note: Today, I’m sharing an important essay from master trader Jeff Clark on how to view today’s market. It’s timeless wisdom that every Dispatch reader can benefit from.
It’s also a great introduction to our special series starting Monday on how to prepare for a market crash. Keep your eyes peeled…
By Jeff Clark, editor, Market Minute
I have a single-frame comic strip taped to the bottom right-hand corner of my desk.
It’s a picture of a man sitting at his breakfast table. He’s slumped over in his chair, and his forehead is resting on the table. Behind the man is his wife. She’s standing in her bathrobe, curlers in her hair, and holding a cup of coffee in one hand. Her other hand is pointed upright, with her index finger extended—as if she’s lecturing.
The caption reads, “Last month you were upset because you weren’t in the stock market. Today, you’re upset because you are in it. How will you feel next month?”
The comic ran in my local newspaper back in late October 1987—just after the crash. But it could have just as easily appeared earlier this month.
Investors felt pressured to buy stocks in January. The stock market moved higher almost every day. Everybody else was getting rich. And the talking heads in the financial media kept telling us how foolish it was to be holding cash.
Today, holding cash doesn’t feel so foolish.
The lesson here is that investors should resist the urge to buy stocks (or any other financial asset) when they feel pressured to do so. Chasing stocks higher into overbought conditions is usually a bad idea.
Trading the stock market is a game that never ends. It doesn’t matter if you underperform the market for short periods of time. You’ll have a chance to outperform as stock prices revert to the mean. As long as you don’t run out of cash, the game continues.
It doesn’t matter if all your friends are making more money than you. Be happy for them. Prosperity is a good thing. But don’t let their success coax you into high-risk, low-reward trades. Envy is a horrible investment strategy.
So, the next time you’re feeling anxious, frustrated, and upset that the markets are running away without you and everyone else is making more money than you are… think back to the action in cryptocurrencies since Christmas, marijuana stocks since New Year’s, and the broad stock market over the past few weeks.
Then, ask yourself… how will you feel next month?
Best regards and good trading,
Editor, Market Minute
Justin’s note: Before I start my trading day, I check my inbox at 7:30 a.m. ET for Jeff Clark’s Market Minute.
Each day, Jeff has new market insights that improve my trading performance… like which charts to watch during the week ahead… which technical indicators to use… or just some tried-and-true strategies from his 30-plus years as an option trader.
I asked Jeff if I could share his newsletter with Dispatch readers. And he set up a link you can use to subscribe to the Market Minute. It’s completely free and should give you the same trading edge I get from reading the Market Minute every day. Click here to get started.
How are you preparing for a market crash? What strategies have worked for you in the past? Let us know right here.
And make sure to check your inbox next week. We’ll be sending a special series of essays each morning—in addition to our regular evening content—to help you navigate the coming storm…