For reference, the following was originally published in my 06/05/26 Newsletter. You can find the latest Newsletter here.
Random Thoughts
I Bet You Want To Party With Me
The best trading books tend to be the oldest.
I used to stay up long after Marcy went to bed on Saturday nights (now I just go to bed!), searching eBay’s antiquarian book section for books related to trading.
When the packages would arrive, Marcy would joke, “Oh, did drunk Dave send you another book?” When we were in the midst of moving, it became more of “Seriously, another book to move?”
Where was I? Oh, yeah, occasionally I’d find a gem like “Viewpoints Of A Commodity Trader” by Roy Longstreet.
Subordinate Thy Will
“The deepest secret for the trader is to subordinate his will to the will of the market. The market is the truth in that it reflects accurately all the forces that bear upon it. As long as he recognizes this, he is safe. When he ignores it, he is lost.”
Roy Longstreet
Like all my old books, there’s a lot to unpack there.
Life’s A Fight
First, Roy’s right. In markets, you win by giving in. This goes completely against human nature. Life’s a fight. Our entire existence is a fight. In caveman times, the fight was to find something to eat while avoiding being eaten, often by the very thing they hoped to eat.
In modern times, “the fight” may be different, but it’s still a fight. You fight for what you believe is right. You fight for higher pay/business success. You fight for your family. And, if you’re from the 1900s like me, “You’ve got to fight for your right to party.” Although now, as I get older, the fight is often to avoid parties.
All The Forces That Bear Upon It
Friend and fund Manager Dick Fruth got his start in a small brokerage. Back then, customers still held actual shares of their stocks. Dick said the curmudgeons in the office would tend to snatch the shares away from the client, write them a check, and send them on their way. Dick, being a little more gregarious, would sit them down and chat them up a bit. He’d always ask, Why are you selling?
“I’m getting married!”
“I’m getting divorced, and she hired a great lawyer!”
“I’m buying a house.”
“I’m retiring.”
“We’re having a baby!”
“I need money to cover some unexpected expenses.”
Rarely did their reasons have anything to do with the actual company.
Dick learned early on that people buy and sell stocks for a variety of reasons.
Those People Will Screw You
Tom McClellan gave an excellent speech at the American Association Of Professional Technical Analysts Conference (New Orleans, 2014). He explained that when you buy a stock, you form a relationship between you and the company. You expect that the company will have your best interests in mind. And, sans a few occasional “bad apples” (CEOs cooking the books or chasing their secretary around the desk,”it” happens!), they usually do. However, you’re also forming a relationship with all those who bought the stock prior to you. And, quoting Tom: “Those people will screw you.”
Everyone Uses Timing
Tom’s right. Never forget that you’re trading traders, not markets.
Since I began quoting Tom often, I emailed him to thank him for the quote. He replied:
‘As for quotes, here is another one from my late mother, Marian, regarding market timing:
“Everyone uses timing in their investing. Some people buy when they have money, and sell when they need money, while others use methods that are more sophisticated.”’
Marian McClellan
The Truth
Price is the truth. There are two, and only two, factors that affect the markets. Supply (selling) and demand (buying). Paraphrasing Greg Morris, fundamental analysis (and other financial theories) suggests what a stock should do. The price is what the stock IS doing.
“The market (price) is the truth in that it reflects accurately all of the forces that bear upon it.”
What Are The Forces?
Right now, speculation has run rampant. I work out in a small neighborhood gym. The gym participates in the “Silver Sneaker” program. Silver Sneakers pays for a gym membership for participating seniors. So, there are usually a lot of older folk in there (at least when I go). Anyway, one of my gym friends, “John” (87), recently told me that since he’s been stuck at home taking care of his wife lately (recent medical incident), he started day trading (BTW, you have my permission to shoot me in the head if I’m day trading at 87). This morning, he stopped to tell me that he’s buying SpaceX pre-IPO. Our discussion was brief because he had to run to “catch the open.”
John’s likely microcosm of what’s out there now. The factors bearing upon the market now are FOMO. The market’s irrational, but as Keynes says, “Markets can stay irrational a lot longer than you can stay solvent.”
Paraphrasing Mr. Longstreet: As long as you recognize prices reflect the underlying forces, you are safe. When you ignore it, you are lost.
Now, keep in mind that the “underlying forces,” the market participants, are constantly changing. I’d imagine that the first sizable sell-off (maybe today, Friday 06/05/26) would knock out the Johnny-come-latelies. These players have very little staying power mentally or monetarily. A sizable sell-off would also likely attract some eager shorts who tend to ignore Mr. Keynes and “confuse the issue with facts” (many of the high-priced stocks have little or no fundamentals). This action could create the mother-of-all “Trend Knockout” (TKO) moves. It’s what happens next that’ll be important. If the market resumes its uptrend, those knocked out will have to “put up or shut up” (i.e., jump back in), and the shorts will be squeezed. Notice that I said “if” the market resumes its uptrend. If this scenario plays out, make sure that you wait for entries. Speaking of which, I discussed waiting for entries in this week’s Dave Landry’s The Week In Charts. Check it out below.
TLDR;
Trading goes against human nature. You didn’t get to where you are by accepting everything as is. In markets, though, you win by “subordinating your will.” Accept what the market IS doing and act accordingly.
Also, keep an eye out for a TKO!
May the trend be with you!
Dave Landry
I'm so very grateful for your incredible wisdom and teachings Dave.