#828 March 8, 2017
Tharp's Thoughts
Weekly Newsletter
  • Feature: Beware Welcome the “Ides of March” This Year, by D.R. Barton, Jr.
  • Workshops: The New Infinite Wealth Workshop, Plus Peak 203 Coming in April
  • Tips: Intra-Day Quiz Series. New Charts For Your Review, by Ken Long, Ph.D.
  • FREE BOOK!: Trading Beyond the Matrix
Peak Performance 101

Feature Article

Beware Welcome the “Ides of March” This Year
by D. R. Barton, Jr.
Soothsayer. Beware the ides of March.
Caesar. What man is that?
Brutus. A soothsayer bids you beware the ides of March.
Caesar. Set him before me; let me see his face.
Cassius. Fellow, come from the throng; look upon Caesar.
Caesar. What say'st thou to me now? Speak once again.
Soothsayer. Beware the ides of March.
Caesar. He is a dreamer; let us leave him: pass.
—The Tragedy of Julius Caesar – Act I, Scene 2
Mr. Shelburne taught my tenth grade English class where we studied Shakespeare’s play, The Tragedy of Julius Caesar. That remains my favorite Shakespeare play to this day, and Mr. Shelburne remains my favorite teacher of all time.

He taught me English in my sophomore year and he taught me Latin 2 (yes, they still teach that in public schools…). He was so smart but he was also one of the humblest, kindest and funniest men that I’ve ever met. Some students took advantage of his good nature but somehow I could see right through that teddy bear exterior to the gem of a man inside.

And wow, was he hilarious! I enjoyed hanging out with him so much that in 1978, when I was no longer his student, we drove 80 miles roundtrip to eat deli sandwiches and see the premier of the movie “Jaws 2”. The food was delicious. The movie was awful. The conversation was amazing. We had the best time picking apart how badly the sequel compared to the incredible original movie.

But back to Shakespeare; the famous line “Beware the Ides of March” was a prophetic warning given by the Soothsayer to Julius Caesar before he was stabbed to death by Roman senators on that very day. This play, in fact, is the only reason we remember the 15th of March every year.

A quick aside: March was the first month of the year in the Roman calendar in Julius Caesar’s time. They used a lunar calendar and the “ides” was the full moon each month (the new moon fell on the 1st, the Ides on the 15th). The Ides of March was celebrated festival-style as the first full moon of the year – the Roman version of modern New Year celebrations (though I would guess they were a bit more raucous back then…).

In 2017, there’s little reason to fear the Ides of March - or the whole month for that matter. Turns out that as of late, March has been generating the best market returns for all months. Let’s take a look at the numbers.

March – The New Happy Month

First, let’s talk about what happened in the last two weeks. We have had twelve days of consecutive new all-time highs for the Dow. This hasn’t happened since 1987 (and 12 consecutive days ties the record set then).

I know what you are probably thinking. The infamous Black Monday happened in 1987 when the market dropped 22% in a single day. While that’s true, Black Monday happened a full nine months after the consecutive high run that started the year. Plus, by the time Black Friday hit, the markets were WAY over-stretched to the upside — up a whopping 43% for the year. (Also, as a modest consolation for the damage done on Black Monday, the Dow actually finished up 2% for the year in 1987.)

We talked two weeks ago about the fact that markets rarely crash directly from all-time highs. Usually, a crash requires first some kind of technical formation involving pullbacks, rallies to lower highs and importantly, a reduction in market participation or breadth. So take those bearish howls you hear from certain analysts with a grain of salt.

In fact, a couple of studies show a high probability that March will continue the move higher in the U.S. stock indexes.

The first data point shows that March has had the highest returns of any month when we look at the last 10 years of data. Here’s a chart put together by LPL financial comparing each month across three timeframes:

As you can see, March is quite strong across all three periods and is especially strong over the past 10 years. Another important factor adds fuel to the intermediate term fire: April’s monthly performance numbers are very strong as well.

One of the good young quants out there, Ryan Dietrick, made the following observation, “Since 1950, when SPX closes green in both Jan. and Feb. (like '17), the final 10 months are higher 24 of 26 times and up 12% on average. Not bad.”

In addition to January and February being up this year, the market was also positive in December and in November. Detrick notes that this has happened only 13 times since 1950 and March followed through with a positive close 11 of those 13 instances.

Seasonal patterns (like an upward bias for March, especially after preceding months are up) can be simple statistical anomalies. That’s why I like to test seasonal tendencies against a fundamental reason or other well researched ideas like the momentum follow-through concept.

One of the many great lessons I’ve learned from Dr. Ken Long is that INTERMEDIATE-TERM momentum begets more INTERMEDIATE-TERM momentum. Building off of Ken’s excellent work, I researched half a dozen sources and found that 3 – 12 month momentum has a history of follow through. Here’s a chart I made that describes the general tendencies:

Does all of this mean to “bet the farm” on a strong March? Of course not. But unless, and until, the market gives us some additional indications of discontent, pullbacks are still to be bought. We might not have to wait long . . . there is much negativity among pundits right now and we are due for some profit-taking after this strong market run.

Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com

Great Trading,
D. R.

Peak Performance 101
March 31-April 2, 2017

Over the past 25 years, Van K. Tharp has modeled traders and the trading process, seeking answers to questions like, “Why do some traders make fortunes while others lose their nest egg?”

Van Tharp is a NLP modeler. To “model” effectively, you have to find out what behaviors and habits highly accomplished people have in common. Once you identify the common tasks that produce excellent results, you need to develop the beliefs, mental states and strategies that allow you to perform those tasks.
You do not trade the markets. You can only trade your beliefs about the markets.—Van K. Tharp

The Peak Performance workshop hones in on these common tasks and puts you in the driver's seat to take control of your trading success. During this three-day intensive course, you will come to understand how your mental states and beliefs play such a major role in your trading, and reality, your whole life.
What does it mean to say we only trade our beliefs about the markets?

Let’s look at some statements and see what you believe about them:

  • The market is a dangerous place to invest. (You are right.)
  • The market is a safe place to invest. (You are right.)
  • Wall Street controls the markets and it’s hard for the little guy. (You are right.)
  • You can easily make money in the markets. (You are right.)
  • It’s hard to make money in the markets. (You are right.)
  • You need to have lots of information before you can trade profitably. (You are right.)

Do you see the theme? Your opinion about each one of these statements is correct, whatever it happens to be. There is no real right or wrong answer. Some people will have the same beliefs as you and others won’t, but that's not important. What is important is that your beliefs about the markets will direct your thinking and your subsequent actions.

Workshop Objectives:

  • How great traders approach their craft and learn a daily procedure that resembles what they do.
  • How you create your own experience in the market and how you are responsible for the results that you get.
  • Become more aware of some of your own psychological issues that affect your performance as a trader/investor.
  • Learn about expectancy, position sizing strategies and the power of big R-multiples through a simulation game. This game is also designed to help you observe your emotions in a setting in which only a small amount is at stake compared with what you will face in the market.
  • Learn some of the variables that affect your emotions and how you can gain control over them.
  • Learn to overcome self-sabotage through exercises done in the class.
  • Students will get guidance on how to develop an ongoing program to work on themselves using the Super Trader Program as a model.
  • Students will leave with a plan to make the maximum use of the workshop.

Participants in this course will get to meet and network with some really great people who a lot in common with each other. Once you attend Peak Performance 101 you have met the prerequisite to attend other workshops in the Peak series (202, 203, & 204). Plus if you have interest in applying for the Super Trader Program this is a qualifying workshop to submit an application.

A Recent Email From A Student:

"The Peak Performance Workshop is the single greatest transformational and supportive trading activity I have ever been part of.

The course helps the trader gain an insight about him/herself that is unavailable otherwise. When first taking the course I was looking for a single objective or takeaway that would advance my trading.

After attending the workshop I now see that just as with trading no single aspect contributes greatest to success. Combining all the techniques taught will allow for major transformations just as dieting and exercising will allow someone to get into better shape over time. I highly recommend the course to anyone— preferably before you begin trading to save yourself some hard felt emotions."—Sincerely, Davon Albury

Learn More About, or Register for, Peak Performance 101
Following Peak 101 in April, we will have
Peak Performance 203 and
The New Infinite Wealth Workshop.
Attend all three and qualify for an $800 Discount. Click for more...

Workshop Schedule

March 2017
April 2017
Attend two events and get an additional $500 off. Attend all three and save $800 more.
May 2017
June 2017

Trading Tip

IntraDay Quiz Series
by Dr. Ken Long

This week’s quiz symbol is EWZ, the Brazil ETF, which is an excellent candidate for intraday trading because it has a relatively low correlation to the US market for a large index. In addition, it is both liquid and volatile enough for day trading and it features strong trending tendencies for both intraday and swing trading.

Chart 1 features an early morning "hybrid frog" short entry (red dot, chart left) that provides a nice payoff on last Thursday, March 2. EWZ’s initial pattern then leads to a routine "Owl" entry later in the morning which you see framed with blue lines on the right of the chart. The entry happens at the green dot.

Quiz Question #1: How would you select some reasonable intraday price moves in order to assess the potential reward in that moment?

Chart 2 is the continuation of the "Owl" entry in Quiz 1. You can see the Owl trade ended with a minor win and that we reversed to go short, aligning with the primary trend of the day. This short trade culminated in an excellent payoff and led to another long Owl entry at the green dot in trade frame 3. We estimated a potential intraday move at the level of the purple dot.

Quiz Question #2: What is the justification for a belief that an intraday move to the purple dot is reasonable?


About this quiz series: The Tortoise Trading Room has become an effective collaborative community of practice. It supports mutual learning as we discover ways in which to apply the general principles and specific systems of Tortoise-style swing and day trading to best fit our own individual circumstances. We emphasis documented “learning-by-doing” by recording and analyzing our results as part of the Ten Tasks of Trading.

As part of that collaboration, we have been making daily quizzes and case studies as checks on learning to see how well we have all internalized our group lessons learned. A number of our members suggested we share this technique with Van's newsletter readers as a way to share what we are learning.

To do that, we are offering a number of our typical “daily quizzes” that invite you to analyze common situations during the intraday trade case studies of the past couple weeks. We invite you to analyze the risks and opportunities in whatever style you are comfortable or familiar with. Then, compare them to our analysis and if you like, share your insights with us as a guest at the chatroom. Please feel free to enjoy some of our concepts and resources at tortoisecapital.net
By comparing your methods of analysis to the Tortoise style you may discover some fresh critical insights that may help us all improve!

Free Book

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Read Van’s Latest Book —
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.

Cary, NC Workshop Information
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