Last night was our Live Conference Call that I host at the beginning of each Month. It allows us to take a step back and identify the direction of primary trends, states JC Parets of

This is helpful because without understanding the environment we're in, how could we possibly pick and choose which tools and strategies to incorporate? This step often gets forgotten by investors. Many would rather just shove their strategy down the market's throat whether it makes sense for that environment or not. I find that foolish.

One chart that I thought told an important story was the Nasdaq Composite plotted with the New Highs—New Lows list. It shows the bottoming "process" taking place beneath the surface:


While the index continued to make new lows toward the back half of last year, it tricked many investors into believing that it was still a bear market. Most investors don't have the time or even the awareness to acknowledge that it is a market of stocks, and not just a "stock market". If you're only looking at the index, then of course you think it's a bear market.

But if you look at the actual market, then you have known better along with the rest of us. Most stocks were already going up, and almost no stocks were still falling, by the time the Nasdaq made its final low late last year. Are you one of the lazy people who still use the indexes as a crutch? Or are you one of those people who aren't even aware enough to know the difference? Don't be one of them.

Look underneath the surface. Take the time to go through the market. And if you can't, or aren't willing to, then find someone who does and make sure to read their notes. The ability to identify the environment first and foremost is the most important part of the entire process. Otherwise, you may find yourself trying to play tennis in the middle of a hockey rink. You need to recognize the arena you're in to know which game to play.

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