My predictions for the stock market for 2008 are as ... you know what? Who really cares? What good do predictions do? Will predictions help you make more money in the stock market during the upcoming year? I doubt it. But over the next few days, you will hear many so-called "experts" on CNBC telling you exactly how much the market will be up or down in the next year, and what stock to buy or sell, or see magazines and newspaper articles doing the same thing. I don't know how many of those experts come back on TV around this time to discuss those same predictions they made a year ago, especially if they didn't quite work out the way they thought.
Anyone can make a prediction, and I'm sure in our minds we all do in our own ways. Right now, I have a feeling of what is going to happen when we begin the new year. Do I know for sure that I will be right? Heck no. That is why I try to keep an open mind and be alert for all possibilities. I can predict in confidence that next year, the stock market will have several tradeable rallies, and that it will also have some tradeable corrections. That's about it. I don't know how many there will be, how long they will last, or when they will occur. Instead of predicting, I am going to focus on reacting to what the market actually does, and what it is telling me through its actions. Reacting correctly will make a trader much more successful compared to making predictions that may or may not come true.
What I am going to try and do this weekend, as the year comes to an end, is look at all of my trades from the past year and analyze what I did well and what I really need to work on and improve. In a book about the great trader Jesse Livermore, the process that Livermore went through at the end of the year is described, and he did something similar. He locked himself in a bank vault for a weekend and dissected every single trade he made from the previous year, presumably to learn from his mistakes and not make the same ones again. If that undertaking is good enough for one of the best traders of all-time to perform on a yearly basis, it is certainly good enough for me to do the same. I would suggest that most traders do likewise. If you keep up a trading diary, it should not be that hard of a task. It may take a little time, but the time put in will surely pay off in the future.
One last note....this weekend's edition of Investor's Business Daily will be one that I will hold onto for a long time. Instead of making predictions that may or may not come true, they focus on the important trends of 2007, the important stocks of 2007, and what we can learn from those trends and stocks. They will also investigate some of the current trends that may continue to be important going into the new year, so we can prepare ourselves to react correctly if they do turn out to be important. Studying stock market history is a great way to improve as a trader, and this issue is one of my favorites in terms of studying and learning from the past year. If you don't subscribe, I would encourage you to pick up a copy at your local store. I believe you will benefit from it.
***Correction - I am assuming it will be Tuesday's IBD that will have the year in review, because I did not see it in this weekend's edition.