Thriving in a Tough Tape II: Judo and Using the Weight of the Market

 This is the second part of the Thriving in a Tough Tape series. You can find part 1 here.

…the master of Judo never relies upon his own strength. He scarecely uses his own strength in the greatest emergency. Then what does he use? Simply the strength of his antagonist. The force of the enemy is the only means by which that enemy is overcome.

– Lafcadio Hearn

Take what the market gives you.

If its up big one day like it was yesterday, you trim a long or write a near dated covered call. When the market gets crushed, that is when you do your buying and so you must have a buy list.

I view this as trading Judo where you use the weight and force of the market to your own advantage and stay prepared and even keeled.

The $SPX was up almost 3% yesterday and many were caught off balance or scrambling to get long even while we have seen a bid market turn to an offered one repeatedly since June.

It has been like this for a while with the market making seemingly lunatic moves down and then up and then down again.

Eventually, we will have a sustained trend again and you will also have opportunities to use the market’s imbalance to your advantage but it will be a very different quality of imbalance.

Many of those who are still trying to trend trade now, swing breakouts or, worse, chase are getting chopped about and at best churning their accounts.