This week we have a stock market forecast for the week of 8/1/2021 from our friend Bo Yoder of the Market Forecasting Academy. Be sure to leave a comment and let us know what you think!
There will be no forecast this week as I am moving my family across the country and had to disassemble my computer systems, making it impossible to measure and analyze all the data necessary for accurate forecasting.
This enforced pause, as well as the stop loss triggered in SPGI after it cycled down nicely out of the gate, acts as a nice reset, and I thought you would find it interesting if I share what’s going through my mind tactically at the moment.
All traders, IF they are to be (and remain) successful, are expected, heuristic learners.
The word “Heuristic” is defined as.
“Enabling someone to discover or learn something for themselves.
"A “hands-on” or interactive heuristic approach to learning"
And that’s exactly what’s been happening to me over the past few weeks.
You see, the methodology that I use to forecast the markets works like a flashlight you shine out into the infinite darkness of uncertainty.
Let me explain...
Imagine you find yourself deep in the total darkness of a cave. You can see nothing, and as you wave your arms around can feel nothing other than a rock floor under your feet.
You exist in a state of TOTAL UNCERTAINTY! You don’t know if everything is ok, or if you are on the edge of an underground cliff that could cause you harm. This is a very stressful state of being and is very similar to most traders in the markets.
They don’t understand what’s happening or why and so trading is much more of a gamble than they can admit to themselves as they “buy and hope.”
But think about how things radically change when you turn on a flashlight in the cave?
Now in an instant, you have TOTAL certainty…you can see everything clearly, right up to the edge of the light “bubble” your flashlight creates.
With this bubble of certainty, you can pick your way through the cave in a state of calm and low-stress execution…
You see that your way is clear for the next 15 feet or so, and then as you proceed, you can see the next 15 feet or so revealing itself... Always getting new information about what’s coming up ahead with enough early warning to make whatever changes are needed to avoid or overcome a danger or an obstruction.
The bottom line is that this process gives you the ability to forecast what’s right ahead of you but leaves you guessing about what’s a few hundred yards in front of you.
I am finding that the publishing schedule for this column is putting me in the position where I know I’m walking towards a cliff in the cave, but I am obligated to take seven steps in the dark before turning my flashlight back on.
SPGI fell off nicely after the publication last week, then retested the lows of its range with very little bearish sponsorship. It was the indication I wrote about which would have triggered exit. But this happened mid-week, so that no action could be taken. This led to a forecast failure as stop losses were triggered on Thursday.
This scenario has played out a few times this year, and so it’s time for me to step back as I always do after a frustrating experience and ask...
“Was this my fault?”
“What can I do to optimize this?”
As to the second question... the solution to this issue is VERY SIMPLE. First, I’ll just drop down to the weekly timeframe since this is a weekly column, which will mean that my observations and forecasts will be in synch with the rhythm of the publishing schedule.
That will bring my accuracy back up to where it should be at the cost of opportunity flow.
Now on to the first question...
Was it my fault?
You bet it was!
I allowed myself to fall into the trap that our brains set for all of us in the markets. I violated a core concept of the methodology in doing so, so of course, this degrades my edge!
I wanted interesting content and enough varied forecasts so that my readers can realize that the markets ARE NOT RANDOM, can be forecasted, and that this possibility means that you can totally transform your relationship to the markets from pain and stress and joy and terror and all the manic-depressive swings most experience…into calm and clear forecasting, with exceptional outcomes.
That’s my mission and why I put in the time to write this column and put myself out there by making clear forecasts that will either succeed or fail without excuses or backpedaling!
But one of our core precepts at Market Forecasting Academy is that in order to produce reliable, repeatable gains…You MUST STOP chasing after trades that you think will make you money and instead focus on only taking trades that you think are unlikely to lose you money! That perspective shift changes everything.
So I violated that core precept in my search for weekly production of new opportunities.
I share this to make the point that I always teach my students... I’m not a savant, with a weird special brain that allows me to do this stuff. I’m just like you... a human with a brain not at all designed to thrive and survive in a technological world.
I get all the same impulses and greed/fear feelings as you do... the difference between you and I is that I know from research, testing, and experience what a lying so and so my brain is and 99% of the time I ignore it and stick to my trading methodology.
And it’s that methodology which is the tool that allows me to forecast with consistency and accuracy.
So that’s what is on my mind today as I get ready to begin a new chapter in a new state with my family.
Nothing will change from the reader's perspective, except I may have more lessons and management discussions and fewer new opportunities as the cycles I will be following are slower.
I hope this walk-through of my adjustment and optimization is helpful for you. I love your comments and questions, so please keep them coming in!
They give me the feedback to better understand what you find valuable and what goes over your head and needs better explanation.
As we go into the summer doldrums, we can expect lower liquidity, more choppy action and a pause as the world goes on vacation during the month of August. This makes this a perfect time to gear down to a deeper timeframe and see what the rest of 2021 has in store for us!
To Learn How To Accurately and Consistently Forecast Market Prices Just Like Me, Using Market Vulnerability Analysis™, visit Market Forecasting Academy for the Free 5 Day Market Forecasting Primer.
Check back to see my next post!
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About Bo Yoder:
Beginning his full-time trading career in 1997, Bo is a professional trader, partner at Market Forecasting Academy, developer of The Myalolipsis Technique, two-time author, and consultant to the financial industry on matters of market analysis and edge optimization.
Bo has been a featured speaker internationally for decades and has developed a reputation for trading live in front of an audience as a real-time example of what it is like to trade for a living.
In addition to his two books for McGraw-Hill, Mastering Futures Trading and Optimize Your Trading Edge (translated into German and Japanese), Bo has written articles published in top publications such as TheStreet.com, Technical Analysis of Stocks & Commodities, Trader’s, Active Trader Magazine and Forbes to name a few.
Bo currently spends his time with his wife and son in the great state of Maine, where he trades, researches behavioral economics & neuropsychology, and is an enthusiastic sailboat racer.
He has an MBA from The Boston University School of Management.
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation for their opinion.