With stocks set to start today significantly lower, you should be asking: Are you an investor or a trader? Investors seek strong businesses and see market weakness as an opportunity to accumulate valuable shares. They dismiss the chorus of pessimists who miss the euphoric rallies where most wealth is created.
Owning good businesses is undefeated over time.
The glaring reality is the stock market is rigged in favor of the bulls. Stocks represent real assets that rise in value over time due to replacement costs and relentless growth promotion. Politicians and central bankers bend every effort, printing money and bailing out failures to fuel growth. Pessimists complain endlessly about this. They also consistently underperform the S&P 500 over the long run.
If trading is your game, discipline is your lifeline. Algorithmic programs dominate price moves, especially at key technical thresholds. You cannot outguess machines with gut feelings.
You must learn the language of algorithms and trade with their signals or risk being caught in their relentless feedback loops.
This morning, the S&P 500 is going to open below its 50-day moving average at 6,699, a known sell trigger for algorithms. Expect machines to drive futures lower, possibly testing the October 10 low at 6,551 in the near term. These algorithmic skirmishes shape short-term volatility but carry no prophecy of doom. Institutional buyers often appear at key levels, quickly reversing the tide.
Recall the October 10 selloff. It was sharp, fearful, and messy. Yet the market found support and resilience soon followed. This low serves as the near-term technical floor, a battleground where traders’ rules will play out. But these battles do not dictate the long game. Algorithms are not inherently bullish or bearish. They exist to profit from volatility.
For investors, the short-term noise is static. What matters is the multi-year horizon, compounding cash flows, earnings growth, and ever-present monetary stimulus. Market gyrations at 6,699 or 6,551 will dissolve into insignificance over a five-year timeline. Quality business ownership is paramount. Market weakness is an opportunity to shop for shares at discount prices.
Trading, on the other hand, demands rigor and humility. Without rules, emotions will lead to losses against machine-driven volatility. Learn and respect the technical levels. Let the algorithms fight their battles while you stay grounded in your strategy. Small losses are better than big losses. Execute at all costs.
The first task is clarity: Who are you? Investor or trader? If you are an investor, relax. Use market weakness to build positions while others panic sell. If you are a trader, focus intently on the 50-day moving average and October 10 lows. These are your key near-term technical barometers. Both investors and traders can find success in this market, but only by embracing their distinct approaches.
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