Hurry Up and Wait

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The key markets around the world have paused. Stocks have stopped going up. Gold and silver have stopped going down. And even key stocks like AAPL have paused to take a break in their breath-taking ascent.

Is this, then, the pause before the next rally? Or the calm before the next storm?

It's these "pauses in the action" that throw most people for a loop. For the ‘doom and gloomers,’ they immediately see every sign of stock market weakness as proof that the world is indeed coming to an end. For stock market bulls, any pause in the action is merely an opportunity to buy more shares at a lower price.

But who’s right?

That is obviously the $64,000 question. People who have been preparing for the end of the world by shorting stocks and buying gold have been hurt over the past year. Whereas the "sheep" who just bought stocks as they go higher? They have made a very nice living.

Which begs the real question here . . . would you rather be right . . . or would you rather make money?

The take away here is that the only way to make money in the market is to do what feels uncomfortable. Think about it . . . if the trade feels like easy money, then guess what? Human beings all think the same when it comes to greed and fear. If you think the trade you are looking at is easy money, then everyone else does too. Human beings, when it comes to money, are just like a herd of thirsty cattle that smell water.

However, if the trade feels hard, almost impossible, it also feels like that to everyone else, too.

Human beings are programmed to do what comes easy. In trading, they are wired to take small profits and large losses. This isn't trite trading advice we've all heard a thousand times. This has actually been proven in psychological studies.

The uncomfortable thing to do right now is to . . . be patient. There is a lot of news out there. There are strong arguments that the world is going into the toilet. And there are even arguments out there that the world may not be in such bad shape, after all.

The secret is this -- there is no hurry. If the next year is going to be ugly, there will be plenty of time to get short and take advantage of the move. If the next year is going to continue to see higher stock prices, then there will be time to get into the next up move.

Right now, the stock market has reached key overhead targets and it is ready for a breather. Conversely, markets like gold and silver are heading into key support levels, and they are also ready for a breather.

In other words, there is no reason to bet the farm right now. There is plenty of time here to let the anxious traders and investors of the world beat themselves up here and see where the dust settles.

Right now the key battle is going on in the S&P 500. Key resistance is 1,390 -- if we get through that price to the upside, then look for this market to continue going higher. Key support is 1,360. If we get through that level to the downside, then look for 1,330 and then 1,300 to get tested.

For now, it's not clear which way this market will break. It's called consolidation. This is an excellent opportunity to do more advanced option strategies such as Iron Condors. This involves selling premium on the stock indexes above current prices and below current prices. Premium is high right now - people are willing to "pay up" for the security of hedging their portfolios with options.

And the good thing about premium is it expires quickly. While I'm waiting for this market to make a decision, the SPY is trading at 138.65. I'm selling the $140 calls and selling the $135 puts via credit spreads, collecting premium while the rest of the market participants beat themselves up.

And once the dust settles, I'll jump back in with a directional trade.

Successful investing,

John Frederick Carter

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