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Tharp's Thoughts
Weekly Newsletter
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Feature: Sideways — The Rodney Dangerfield of Market Types by Kim Andersson
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Workshops: Workshop Dates Set for London, England this October! Plus the rest of 2017!
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Podcast: Van Tharp Announces a New Podcast!
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Tips: Value vs. Growth Stocks — An Impressive Flip in Performance by D.R. Barton, Jr.
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Attend Both August Workshops and Take an Extra $1,000 Off the Combo!
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TIME SENSITIVE: Due to the extensive pre-work that will be distributed by Dr. Long to prepare for this class, it is highly recommended that students sign up as soon as possible after making the decision to attend. We want each student to have ample time to complete their work and be fully prepared before attending, so time in class will be the most beneficial for all.
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Sideways: The Rodney Dangerfield of Market Types
by Kim Andersson
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D.R. Barton quoted Warren Buffett recently on what to do in flat markets: “When there’s nothing to do, do nothing.” That’s very sage advice — especially when a sideways market has very little volatility. Doing nothing is one of the strategies that I advocate
traders adopt under certain circumstances in an upcoming new VTI workshop called Sideways Market Strategies.
One of Van’s primary tenets of system design drove the creation of this workshop: trying to build a trading system that works well in every market type is insane, yet, it is possible to build a Holy Grail system for any one specific market type. When you look at most of the trading systems around, they work in bull markets. In fact, any buy and hold based strategy works well in bull markets. “Anybody” can trade a bull market. Think back to the late ‘90s when everyone, including your hair dresser and restaurant waiter, was making money — and probably was telling you about it too. Conversely, most people find bear markets a difficult environment to make money —
likely because they are trying to trade systems meant for bull market. That is, bear markets are difficult unless you trade systems specifically designed for bear markets. To help traders perform better in bear markets, Van launched a bear market type trading workshop several years ago. That bear market will eventually wake from its long hibernation period, so be prepared.
In the meantime, what about trading sideways markets? You can find lots of information on bull markets and bear markets but when was the last time you read anything good on sideways markets? Ask traders you know how they handle sideways markets and see if they dismiss your question quickly. As I searched for information on flat markets and how to trade them, the comedian Rodney Dangerfield’s catchphrase kept coming to mind, “I don’t get no respect.”
Sideways markets get no respect from traders. Simple case in point — unlike their more famous cousins — the bull and the bear, sideways markets lack a totem animal. Why not call them “Cowardly Lions” as Vitaliy N. Katsenelson does in his book “The Little Book of Sideways Markets?” Or what about calling sideways volatile conditions a “Snake Market” and maybe calling sideways quiet a “Worm Market?” By not even dignifying sideways markets with a totem animal, we risk disrespecting their slithery ways.
Why Sideways Markets Deserve Respect
If for no other reason, the sideways market type deserves respect because it happens for more time than bull and bear market types combined. Skeptical? Here are a few pieces of evidence that sideways market show up frequently and tend to persist.
First, Tom Basso found that markets moved sideways about 64% of the time from 1964 to 1999. Second, take a look at the graph below that comes from some of my research. It depicts returns of the Dow Jones Industrial Average from the late 1920s to about 2011. As you can see, the market moved sideways almost 70% of the time over the last 90 years.
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Next, look at this more recent and shorter-term example of weekly bars for SPY from April 2014 to July 2016:
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You can see the S&P 500 was sideways for over 2 years recently. If you lacked ways to identify that we had entered a sideways market type, you might have tried trading systems that didn’t work so well. Without sideways market systems, you may have been frustrated trading (or not trading) for two of the last three years.
Besides equities, commodities move sideways for noticeable periods as well. The chart below indicates that you would have made very little money (if any) trying to “buy low and sell high” or “sell high and buy low” over the last 30 months in the crude contract.
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Trading Different Market Types
Compared with other market types, trading bull markets is relatively easy – just get long because almost everything is going up. Bears can be traded well (when you know what you are doing) for two main reasons — they are rare enough that you can prepare for them well ahead of time and because of the rapid price moves. Sideways are the hardest of market types for most traders typically because price moves little in either direction or it moves back and forth a lot within a range.
Another feature of sideways markets — the market can stay sideways for long stretches of time. Have you ever tried to trade through a long sideways market (or sat one out) wondering how long it could go on? A common response by traders after becoming frustrated is to move to the sidelines while remaining determined to trade again once the market decides to move up or down out of its range.
That frustration comes from sideways markets’ uncertainty and unpredictability. Bull markets generally go up with relatively lower volatility because confidence is higher. Bear markets move down almost always with much higher volatility. I believe the volatility comes from a broad consensus amongst market participants experiencing similar emotional swings at similar times. Either they want to get out of the market at the same time or they want to get back in believing the “bottom” has been hit.
Unlike the wide mood swings commonly found in bear markets, sideways markets more commonly fill traders with lots of uncertainty. When a sideways market occurs after a bull market stalls, participants wonder, “Is the bull done or is this just a pause?” When the market goes sideways after a large decline, participants wonder, “Is the end of the bear here or will the weakness persist?” Traders wonder what to do next as a sideways market drags on and that uncertainty often turns into frustration.
How to Handle Sideways Market Types
Based on one of Van’s Tharp Think principles relating to systems, traders could create systems specifically tailored to work when price goes nowhere. But do such strategies even exist? Could they make money when price moves neither up or down? Based on my research, my trading systems, and my personal trading results in sideways markets, I’m here today to tell you unequivocally — yes!
Trading sideways markets profitably requires several specific pieces of knowledge:
- You need to know how to recognize when the market is in a sideways condition.
- You need to know what trading systems work in sideways markets and the ones that don’t (quite a few).
- And, most importantly, you need to know when to sit on the sidelines — because that’s the most profitable strategy sometimes.
Trading sideways markets also requires a well-thought plan for trading them. They happen frequently and are challenging from a price action perspective as well as a psychological perspective. Unless you can afford to sit on the sidelines for more than 50% of the time in nearly any given market, grant sideways markets the respect they deserve and learn how to trade them properly.
You can gain valuable sideways market knowledge and I can help you create a plan to trade flat markets profitably. VTI will offer the new workshop on sideways markets in August at the Van Tharp Institute training facility in Cary, North Carolina. Learn all you need to know about how to both profit and preserve your capital in any timeframe when price is going nowhere.
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About the Author: Kim Andersson is a graduate of Van’s Super Trader program and originally hales from Canada. She trades and works part time as an electronic security professional at a defense contractor in the Washington, DC area.
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Oneness Awakening is Only 16 Days from now!
Spend a weekend with Dr. Tharp using some of the most powerful transformational strategies he has found over the last thirty years. Plus, if you are among those interested in getting the discounted Super Trader Program specials in July but don't yet qualify to apply, this weekend is your entry pass.
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Presented by Van Tharp
and Rebecca Price
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The Role of This Course and The Super Trader Program
If you are interested in applying for admittance to the Super Trader Program, this workshop is a qualifying event. The first stage of the Super Trader program is very much about working on the self, rather than working on systems or trades. Since this course focuses on your inner-growth and self-work, Dr. Tharp is willing to allow candidates to use the course in a similar manner to those that attend the Peak Performance 101 workshop, and motivated traders are able to apply to the program after attending either one. At $495, this course is also the most cost effective way to take a qualifying workshop to apply to the Super Trader Program.
The price of the Super Trader Program will increase after July 31, 2017. This is the last qualifying workshop before the price increase.
Reach A Higher Level of Consciousness: A Special Event With Van Tharp
How could a higher level of consciousness help a trader? Most people have had the experience of watching someone who is really great at what they do. Whether it's a sports star in the game or a masterful craftsman, there is an element of effortlessness that comes from their ability to be "in the moment." Many people have had this experience themselves, in some aspect of their lives — for a few seconds or even a few minutes. The moments may be fleeting, but you know when you've had one. It's at these times when we can recognize these people are in a high state of awareness. Participating in the Oneness Awakening Course is an extraordinary opportunity to benefit from some of the most important journeys
Dr. Tharp has taken to transform his life, and to cultivate this awareness in your day to day life.
The Oneness Awakening Weekend course has become a fundamental tool in helping Dr. Tharp accomplish his mission of transformation and ultimately help each of his clients succeed. Students who attend this two-day intensive workshop will walk away with tools to help them cultivate awareness in their life, and they will also experience an immediate and tangible shift in perception. As a result of this experience, traders can expect to naturally become more aware, positive, calm, and centered. By extension, they will also experience a shift in how they perceive the market. When a trader sees the market as it really is, rather than what they want to see, the act of trading becomes more relaxed and they
become more confident and successful. Does this sound like the type of experience you want trading to be? While this two-day course is not a technical course about trading, we have seen amazing results in the traders who experience the benefits of being more 'awake' and aware, calmer and more centered. Why? Because the person themselves are always the primary instrument, even before the technical skills of trading are engaged. Just like the athlete with impressive skills, traders can also utilize the phenomenon of tapping into their awareness to achieve premium results. Keen awareness, in turn, opens up new possibilities. Another great thing about the concepts and experiences in this course is that they have benefits that apply throughout students' lives, not just in their trading
endeavors. Time and time again, traders tell us that their trading improved after taking this course, but also their personal lives as well!
If you would like to know more about this workshop, or talk with someone to see if this workshop is right for you, we invite you to call or email Rebecca Price. Rebecca is a certified Oneness Trainer. She has been teaching with Dr. Tharp for 3 years, and is enthusiastic about helping others to dive into their own transformation. Call 919-466-0043 or email [email protected].
Or Register now. The price is low, the quality is high and the experience is priceless!
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Presented by Van Tharp
and Rebecca Price
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August 5-7
Saturday-Monday
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August 8-9
Tuesday-Wednesday
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Dr. Ken Long begins his Day Trading Systems workshop by teaching you two day trading systems called the Frog and RLCO. Through his action-packed lectures students will gain an understanding of each system’s beliefs, rules, and variations.
Ken has been a long-time active trader and observer of the markets. He's noticed the consistent habit of prices for particular issues to move a certain amount. Much like a frog jumps when it hears a loud noise, prices tend to move a certain amount before they pause or move again. Different frogs are able to jump different distances, but each one tends to jump about the same distance as it did last time. Would it be possible to know about how far a stock’s price would move on any given day?
After attending this three-day workshop you qualify to stay on and live trade these same systems for the next two days alongside Ken. Plus attendees will receive follow up assistance in Ken's ongoing Chatroom for Traders.
Special Bonus: Free Membership in Powerful 'Chatroom' Plus Three Coaching Calls
Inspired by the powerful networking Ken has seen develop over the years at VTI, both through the Super Trader program and workshop attendees, he created and leads a group of traders with a shared interest in swing trading and intraday trading which he calls the Chatroom.
Ken and his chatroom members have been developing a daily community of practice to encourage a healthy and helpful environment to support each members' development as a trader.
And, as a way to maintain the spirit of cooperation experienced at the workshops after you are headed back home, you get free membership and access to this chatroom forum. And while this membership is free to workshop attendees, the value of this ongoing interaction and learning is likely as valuable the workshop itself.
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Presented by Kim Andersson
Profit When Price Goes Nowhere: How to Successfully Trade Sideways Markets In Every Time Frame
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August 11-13
Friday-Sunday
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Announcing An Exclusive New Trading Workshop:
Sideways Market Strategies
Profit When Price Goes Nowhere:
How to Successfully Trade Sideways Markets In Every Time Frame
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Kim Andersson covers a few objectives of the new Sideways Market Strategies course in this short video above.
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Did you realize that no matter what time frame you trade or what method you use to measure them, Sideways markets happen between 59% and 65% of the time!
And yet scant attention is given to this market type. When you encounter them the task of trading becomes much more challenging, stressing your systems and your psychology beyond your normal comfort zone. This new workshop is the antidote to this under appreciated, and least understood market type.
AN EXTRA SPECIAL BONUS FROM YOUR INSTRUCTOR
As an extra added bonus, Kim Andersson has agreed to provide additional support to all Sideways Market Strategies attendees for the remainder of 2017! This is no small offer. Your class will get four monthly calls (1 hour each), as well as ongoing email support for months after the workshop. She will offer her feedback and expert guidance for any sideways trading issues you may have for the rest of 2017. This way you know that you can be fully prepared to trade in Sideways conditions and get your follow up questions answered.
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Presented by Van Tharp
with co-presenter RJ Hixson
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September 15-17
Friday-Sunday
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NEW! Systems Thinking for Traders
Presented by Van Tharp
with co-presenter RJ Hixson
(more information coming soon)
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September 19-21
Tuesday-Thursday
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October 2017 LONDON, ENGLAND
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Presented by Van Tharp
with co-presenter RJ Hixson
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October 13-15
Friday-Sunday
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Presented by RJ Hixson
and Van Tharp
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October 17-19
Tuesday-Thursday
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October 21-23
Saturday-Monday
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Presented by Gabriel Grammatidis
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November 10-12
Friday-Sunday
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Presented by Gabriel Grammatidis
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November 13-14
Monday-Tuesday
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Van Tharp is excited to announce our new podcast series, Tharp Cast: Gems from the Matrix.
In our first episode RJ Hixson interviews William Costelloe who is a professional trader, a member of the Super Trader program, and a fascinating man from Chicago.
In this half hour podcast, he talks a little about his background, some of the reasons why he decided to enroll in the Super Trader program, and some of the benefits he has gained.
Click below to listen to this very interesting interview.
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In the coming weeks we will have more podcasts from Van on Tharp Think Principles as well as more Super Trader interviews that will give you an insiders look of the program.
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If you've ever wondered what it is like to be part of Van Tharp's Super Trader Program click on the short 4 minute video below to hear more about what our students have to say about their Super Trader journeys.
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I plan to continually look for new things to model to help people become more successful traders and investors. And what we are working on now is doing everything we can to make the Super Trader Program, which I think is already unique and the best in the world, even better...We have about 10 open slots in the Super Trader Program for 2017. We’d like to make sure that everyone who wants to join this year can get in at the current rate, which goes up after July 31st. Right now the price of the program is $52,500 for the first three years. It will go up to $60,000 for the first three years in August 2017. As a result, for those who qualify*, we are running a one month special on the
program.
Now through July 31, We Have The Following Specials:
- A lump sum one-time payment of $50,000 (less applicable discounts**) will save people $10,000 over the new price.
- Three installment payments six months apart for the current price of $52,500 (less applicable discounts**) will save people $7,500 over the new price. This payment option spreads out the cost over a year and a half period — which I don’t do normally.
* To qualify for the ST program, applicants have to attend one workshop – either Peak Performance 101, Infinite Wealth, or Oneness Awakening. This allows to me personally assess your openness to the psychological part of the program and to gauge your level of commitment. To enroll in Super Trader before the August 1 price increase, only one workshop remains to qualify you for the program — Oneness Awakening on July 8-9.
** Previous purchases from VTI reduce your total cost of the ST program. For example, if you attended workshops or purchased home study courses which are part of the ST curriculum, you get a 50% credit for the amount you have spent already. If you'd like more information or specific amounts please email [email protected]
For more information about the program click here.
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Value vs. Growth Stocks — An Impressive Flip in Performance
by D.R. Barton, Jr.
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Back in April, I shared a short Jeremy Grantham video with you. Grantham and his eponymous firm GMO are firmly in the value investment style camp. Grantham highlighted some of his long-term valuation thinking in that video and it’s still worth a watch if you haven’t seen it yet — click here.
I just read GMO’s six page June edition of “Global Equity Insights” and it appears that Grantham hires some pretty deep talent. Ph.D. physicist Neil Constable and a Rick Friedman (Wharton plus Harvard pedigree) wrote a data heavy yet insightful research piece. Let me share my takeaways and I why I think their observations are useful for us.
The Style Switcheroo
Understanding the culture and background of the authors or their firm is always helpful whenever you read a research piece. GMO is unabashedly a value firm and with $77 billion under management, they are going to “talk their own book” in their research. With that said, they still give us some very useful information. Let’s dig in.
In 2016 value stocks kicked some behind. They outperformed growth stocks by a wide margin:
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Note that the authors didn’t use some ginned-up measurement, they use two well established indexes — the Russell 3000 Value index and the Russell 3000 Growth index.
Value outperformed growth significantly in its magnitude and its persistence in 2016. Those were halcyon days for value investors like the folks at GMO.
Skipping ahead to 2017, we find that the game has been flipped on its head. This next chart graphs U.S. value, US growth, EAFE (Europe, Australasia and Far East), and emerging markets:
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The authors note, “Style shifts are common, but the magnitude of the change from late 2016 to early 2017 has been particularly dramatic.” That’s almost an understatement but they go on to say that value’s 2016 outperformance and 2017 underperformance are both “1 out of 20” type of moves.
To explain the admittedly large deviation in the two styles, they turned to sector analysis. Here’s a cool graphic that you’re free to study at length:
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I’ll give you the short version of the graphs — Info Tech has been crushing it. Big names that you already know have been vast outperformers: FB, AMZN, AAPL, NFLX, GOOGL. Also, semiconductor chip names like NVDA and MU have fueled the Growth column with the help of health care and consumer discretionary names.
So What?
The good folks at GMO remind us that the big switch to growth outperformance in 2017 starts to make value look good again. They wrote the piece before the two-day Tech Wreck that we covered last week so I give them kudos. Based on the recovery of the big names from the Tech Wreck, however, my expectation is that those big stocks will once again find a way to outperform over the summer as the market grinds higher.
Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com
Great Trading,
D. R.
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About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured analyst on Fox Business' Varney & Co. TV show (catch him most Thursdays between 12:30 and 12:45), on Bloomberg Radio Taking Stock and MarketWatch's Money Life Show. He is also a frequent guest analyst on CNBC's Closing Bell, WTOP News Radio in Washington, D.C., and has been a guest on China Central Television - America and Canada's Business News Network. His articles have appeared on SmartMoney.com MarketWatch.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at
"vantharp.com".
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FREE Book!
We pay for the book, you just pay for shipping.
Read Van’s Latest Book —
TRADING BEYOND THE MATRIX
The Red Pill for Traders and Investors
Eleven traders tell their stories about transforming
their trading results and lives, in this 400 plus page book.
Below is a brief video on how powerful this book is to traders.
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Cary, NC Workshop Information
For a list of nearby hotels for our Cary, North Carolina locations,
click here.
Book your flight arriving to the Raleigh-Durham International Airport (RDU).
When traveling to a three-day course, it's best to arrive the evening before.
To help determine your arrival and departure times, see:
Questions? Click Here to Ask Van...
CONTACT US
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This is a supplement to our subscription based newsletter, Tharp's Thoughts.
800-385-4486 * 919-466-0043 * Fax 919-466-0408
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