In the Stock Market, the Readiness is All - Cabot Wealth Network

In the Stock Market, the Readiness is All

Stock Market Video

The Readiness is All

This Week’s Fortune Cookie

In Case You Missed It

In this week’s stock market video, Mike Cintolo delves deeply into the action of growth stocks during the past few weeks and concludes that the onus is now on the bulls to prove that leading glamour names have room to advance. Despite that, Mike says there are still many “dependable growth” stocks acting well, and highlights a few that could be bought during this weakness. Click below to watch the video!

We’re at an interesting point in the stock market. And by interesting, of course, I mean threatening as hell.

Many of the growth stocks that made it such a fun summer have gone into retreats. The major indexes, while they haven’t really turned down, have shown a couple of weeks of increased volatility and took a vicious left hook to the nose on Thursday.

As always, Cabot remains obdurately silent about what might happen to the market in the future. It’s possible that markets will reel around like a linebacker with a concussion for a while longer. Or we may be at the beginning of the 15% correction that so many commentators love to predict. Or markets may pull up their big-boy pants and get back on the upward path.

I don’t know. Cabot doesn’t know. And we doubt that anybody out there knows, although whatever happens, someone will take credit for predicting it and brag about it for years to come.

I think Hamlet was probably the best commentator for the present circumstance. He said, “If it be now, ’tis not to come. If it be not to come, it will be now. If it be not now, yet it will come.” (Translation for today’s market: We’re going to get a correction sometime, but we don’t know when.)

But it’s what Hamlet says next that makes him look like the historical predecessor to a Cabot growth analyst. He said, “The readiness is all.”

I couldn’t have said it better myself.

Bull markets are easy: you buy. Bear markets are easy: you sell.

But the transitions from one to the other and back again can send strong men in search of the Xanax bottle. Or a bottle of something else.

And that’s because change is difficult for everyone. It’s emotionally difficult to give up the rosy glow of a brokerage account in an uptrend and prepare your portfolio for foul weather. It’s like the scramble when a sudden thunderstorm interrupts a pleasant picnic.

It’s equally difficult for people to leave behind their depression and lethargy after a long bear market ends and there’s a new bull in town. Too many people miss the opportunity to grab those early gains when markets turn up. Bear hangovers are hard to cure … and expensive, too.

The key to managing markets in transition is planning ahead. Follow the Cabot timing disciplines to see clearly when markets change character. Know your loss limits for each of your holdings and follow the selling rules when market turn down. Have a watch list and be ready to buy when markets turn up.

Market transitions—and I’m not sure whether we’re in one now or are just getting faked out again—only cause major damage if you just sit there, either because you don’t have a plan, or you don’t have the emotional resources to take action.

The readiness is all. Hmmm. That Shakespeare had a way with words! I wonder if he wrote anything else?


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Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.

Tim’s Comment: I’ve written the same message countless times myself—because knowledge of why stocks move is critical to profiting from those movements—but I’ve never used the word whim while doing so. I shall try to in the future.

Paul’s Comment: I’m always a little appalled when analysts talk about the market as if it were a rational place. If it is, it’s only because the various irrationalities of the people who trade there might possibly cancel each other out. Everything goes into the market, including fear, greed, stupidity, brilliance, insight and error. As a science writer for the New York Times, Kenneth Chang understands the implications of that mix.

In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.

Cabot Wealth Advisory 11/4/13—One Great Solar Stock

Cabot Stock of the Month analyst Tim Lutts writes in this issue about how to sort out the different investing strategies of the various Cabot investing advisories. He gives some general advice about the rules of growth and value investing. Stock discussed: First Solar (FSLR).

Cabot Wealth Advisory 11/5/13—Volatility in Options Pricing at Earnings

Jacob Mintz, the options veteran behind Cabot Options Trader, looks in this issue at how earnings season, with its big upswings and downswings, can make life difficult for options traders. He also hints at a way to get around that difficulty.

Cabot Wealth Advisory 11/7/13 —Investing is an Unnatural Business

In this issue, Mike Cintolo of Cabot Market Letter writes about how the markets can use your own instincts against you. Contrary thinking is needed to succeed as a growth investor. Stock discussed: Align Technology (ALGN).

Have a great weekend,

Paul Goodwin
Chief Analyst of Cabot China & Emerging Markets Report
And Editor of Cabot China & Emerging Markets Report


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