Until stock markets sound the "all clear" signal and we can get back to our regularly scheduled bull market, we have to operate with a different set of rules in order to protect our capital -- both money and mind. Corrective or Bear Markets require a different set of tools. And it's not just knowing that the odds more favor short direction plays versus long direction plays, it's knowing that you have to manage open risk differently. You have to structure trades differently. And you have to operate in shorter time frames.

Down markets can be incredibly profitable for nimble traders. In fact, in my 20-year career, my most profitable years ever were 2000 and 2001 when we were on the backside of the Spring 2000 "dot com" bubble where NASDAQ dropped a dramatic 78%!! 

This is a special episode for me. James Bartelloni, CMT was one of my early mentors in the field of Technical Analysis. It's a treat to be able to have him join us on the podcast. What I like about Bart is that every time we chat, he gets me thinking about something new. He looks at the market in a different way than most market participants. His risk management techniques include sacred geometry, musical notes and lunar cycles, among others. It's always an interesting conversation with Bart, the editor of the blog BartsCharts.com. If this episode gets you thinking differently and gets you a bit out of your comfort zone, mission accomplished!

Last Monday we discussed our thesis for a bounce in Indian stocks and by Friday we were talking about how to manage those trades so that we could avoid letting winners turn into losers.

Now that we've gotten a decent bounce, many are asking what the next directional move in the market is going to be. In this post we'll outline why we think that Financials and Smallcaps are the areas to watch for clues.

Well, here we are folks... Election Day.

Depending on who you talk to, today could be "the most important mid-term election of our lifetime." (aren't they all?)

All the hype. All the buildup. All the angst.

Regardless of the outcome, it's possible U.S. stocks can experience outsized and emotional moves. We all remember November 2016 when final voting tallies were coming in and overnight futures were signaling the end of times, all trading limit down. Every market participant was scared and likely had a sleepless night. And what happened when they rang the opening bell?

There are assets out there that have a lower or no correlation with the rest of the U.S. Stock Market. These investments are really helpful, but even more so when we're looking for stocks to buy in an environment where we think most stocks keep falling in price. One of these less correlated areas is the Uranium space.

Investors in Uranium stocks over the past 7 years have been some of the worst stock market investors in the world during that period. Think about this, Uranium investors have performed even worse since 2011 than gold and silver investors! That is saying a lot. We've already been buying precious metals stocks the past couple of months so it seems like rotation into the worst of the worst areas is happening in unison.

First of all, here is the Uranium Futures chart breaking out from the downtrend it has been in since the Fukushima nuclear disaster in 2011 that marked the top in the space:

Click On Charts To Zoom In

It's easy to say. You hear it all the time. That word, "Patience".

How many of us actual put this into practice? It isn't easy. We're an instant gratification society. How happy does it make you feel when someone 'likes' a picture of your kid, or the beach selfie you took over the weekend. Traders get similar dopamine kicks when we enter a trade, and that soothing bling sound on the computer goes off, almost as a reward for entering the trade. You notice how those post trade sounds are never something ugly and nasty like the sound of a car accident or something horrible. It probably should be, because that trade you just put on is most likely going to lose you money. That's not blingy like the default audio settings on your trading platform are suggesting.

The point is that in both markets and in life, I think we need to recognize what is just making us happy today vs what will make us happy in the future. Temporal Discounting is what the behavioral finance people call it. Who are you trying to make happy - the JC now or the future JC? I think it's important to approach both life and the markets by proposing this question.

From the desk of Tom Bruni @BruniCharting

The TSX Composite is down roughly 6.75% year-to-date, with stocks getting hit hard since their July 13th, 2018 high. Only one sector is positive over that time period, but I think its recent action gives us a really good perspective on the type of market environment we're in.

Counter-trend trades are lower probability by nature, which means risk management is vital both when they work and when they don't. Taking the loss and reevaluating when the trade thesis is invalidated is something most traders think about, but managing risk on a trade that begins to work right away is just as important and not discussed as often.

Today I want to look at the importance of managing positions that begin working right away, so that we can avoid winning trades turning into losers.

Small-caps have been lagging for most of the year with that trend really accelerating in May, posing a major headwind for the broader market. One thing we were looking for before putting cash to work on the long side was a sign(s) of risk appetite for stocks, which we're seeing for the first time in a while. The question now is will it last and how does it affect our portfolios?

Rates are at multi-year highs and bond prices are at multi-year lows. This has been the trend. We've been in the camp that rates would break out above 3% and that 4% was next. This has been logical target for a variety of reasons, but today that is not necessarily the point. I just don't think it will be quite so simple for rates to continue higher, and a break back below 3% would make rates incredibly vulnerable to fall quickly. 

I am really enjoying these conversations with Phil Pearlman. This is the 3rd episode we do where we're discussing important topics about our feelings and emotions. Today's topic is Grit, and the advantages that someone with grit has these days over those who don't. Taking a loss and moving on is not just part of investing, it's part of life. In this conversation we discuss the Bond Market and the implications of U.S. 10-year yields losing 3% and why Phil is Bullish Grit going into 2019.

Here is the second episode in full:

In corrective and bear markets, bounces and false rallies are powerful and swift. They should not be feared, but they should be respected. And the patient among us will use these rallies for better entry points on our short ideas.

Tuesday's stock market bounce affords us a great chance to get a better entry in a name that is high on our list to be short -- Boeing $BA