Are You Ignoring These Charts?
Playing Devil’s Advocate
Last week, I walked through “The Best Stocks You Don’t Own”
The message was pretty simple.
I’m bullish on the market, but I’m bullish in a very specific way.
The better opportunities right now continue to be under the surface, in areas the S&P 500 doesn’t own enough of.
That matters because this week I wanted to do the opposite.
Instead of pounding the table on the bull case, I wanted to play devil’s advocate.
Not because I’ve flipped bearish.
Not because I think the market has to roll over.
But because good investors should be willing to go look for what they don’t want to find.
That’s the search for intellectual honesty.
The Brain Plays Tricks On Us
One of the key ideas from this week’s video is that we tend to see what we’re looking for.
If you’re bullish, you’ll find bullish charts.
If you’re bearish, you’ll find bearish charts.
That’s human nature.
The brain tries to correct the data in real time to match what it already believes.
Which is exactly why we need a process to play Devil’s Advocate routinely.
My Two Cents
The point of playing devil’s advocate isn’t to suddenly throw on a bear suit and start yelling about the end of days.
The point is to stay honest.
I’m still bullish.
The weight of the evidence still leans that way.
But being bullish doesn’t mean we have to ignore the red flags sitting right in front of us.
Stay with the long-term uptrends. Respect the areas showing leadership.
Be aware of rates. Be aware of index concentration.
And be aware that the S&P 500 can struggle even while plenty of stocks underneath the surface are working.
That’s not a contradiction.
That’s just the market doing market things.
Last week was about the best stocks you don’t own.
This week is about the risks you shouldn’t ignore.
The goal isn’t to predict.
The goal is to stay aligned with the evidence, manage risk, and have enough intellectual honesty to look at the charts that don’t confirm what we already believe.
Because if you only go looking for bullish playing cards, don’t be surprised when the market eventually deals you something different.
Anyway, that’s my two cents.
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FREE – The Sunday Stalk List | Ep. 42
Tomorrow, I’ll break down more of what I’m buying in the Sunday Stalk List.
If you want clean charts, clear setups, and tactical insights, this one’s for you.
It hits your inbox every Sunday so you know exactly what to stalk for the week ahead.
Cheers,
Larry Thompson, CMT CPA
