The Mindful Investor

David Keller
About the author: , CMT, is the President and Chief Strategist at Sierra Alpha Research LLC, a boutique investment research firm focused on managing risk through market awareness. He was previously a Managing Director of Research for Fidelity Investments in Boston, as well as a Past President of the Chartered Market Technician (CMT) Association. Learn More

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The Mindful Investor

Investors Never Say Never

by David Keller

“The market will pull back about 5% before continuing higher.” “Banks always do well with a steeper yield curve.” “If the market moves higher, then gold will definitely pull back.” “I’m sure we’ll see a correction in the next two weeks.” When I was in college, one of my least favorite courses was Chemistry 202. This was second-year chemistry, which involved an extensive lab period. Mine was Tuesday and Thursday evenings from 6:30-9:30pm (only a college student would schedule something that insane). I was not a good chemistry student. Don’t get me Read More 

The Mindful Investor

Overbought Means Up A Lot

by David Keller

I was once asked the classic “trapped on a desert island” question, with a technical analysis twist: If you could only have one technical indicator (except price), which would it be? For me, that’s an easy one. RSI. As part of my training experience at Bloomberg, I was introduced to all the different forms of financial analysis. The moment I saw a price chart, I was hooked. I had studied Psychology at Ohio State, so a toolkit that allowed me to quantify investor behavior just felt right to me. Of all the technical indicators that I learned Read More 

The Mindful Investor

A Disciplined Approach to Technical Analysis

by David Keller

I’ll never forget the first time I did a simulated engine cutout at altitude.  I was up in the air with my instructor, preparing to do some maneuvers, when he unexpectedly reached over and pulled out the throttle. The plane lurched forward, rapidly losing altitude, while my instructor turned to me and calmly asked, “Okay, you just lost your engine. What do you do?” What do I do?!? Well, at that moment, I completely panicked, my heart rate increased and my palms began to sweat. Unfazed, he slowly talked me through the necessary steps: Read More 

The Mindful Investor

Gathering Evidence

by David Keller

Humans are emotional beings, generally making decisions based on their emotional state. Consequently, when the market moves against your positions, you will most likely have a visceral reaction to that event. The fear of losing and/or the fear of missing out are often the causes of bad investment decisions. In his book Mastering the Market Cycle, Howard Marks wrote that “[a] lack of emotionality is a gift (in investing, that is, but perhaps not in other areas, like marriage).” So I guess the secret is to just ignore our emotional reactions Read More 

The Mindful Investor

Bad Overbought Or Good Overbought?

by David Keller

Question: When can “overbought” be a good thing? Answer: When something becomes really overbought. Allow me to explain. The Relative Strength Index (RSI) is one of the most common ways to measure price momentum, ranging from 0 to 100.  When the RSI becomes overbought, the price has risen too high too quickly, generally leading to a downside correction. When the RSI becomes oversold, the price has dropped too low too quickly and you’d expect an upside rally to compensate. That’s the simple interpretation, anyway. A deeper look into RSI shows Read More 

The Mindful Investor

Defrosting the Markets: Thoughts on the January Barometer

by David Keller

I’ve written several articles regarding seasonal trends in the markets, including the four-year Presidential Cycle, the “Sell in May” phenomenon, and even general thoughts on cyclical patterns in price. This time of year, we’re faced with a very interesting anomaly known as the January Barometer. This is different from the January Effect, where January tends to start strong due to money managers going to back to “risk on” following end-of-year window dressing. You also tend to see small caps outperform large caps due to the same reason - that pattern has Read More 

The Mindful Investor

Forget the Price and Anchor to the Trend

by David Keller

Anchoring is a behavioral phenomenon wherein we, as people, lock in to a specific reference point that then affects our subsequent decisions. When I taught technical analysis at Brandeis University, I asked one group of students to tell me where the S&P 500 would be at the end of the semester. I followed this up by asking a different group of students to answer the same question, but I told them that I’d asked another group of students already and their average answer was about 10% below current levels. Which group of students do you think came up with a Read More 

The Mindful Investor

Investors Don't Like to Lose

by David Keller

Everyone believed they had a sound approach to investment during the extended bull market of 2009-2018.  When everything’s gaining in price, slowly and steadily, it’s easy for confidence in your process to become overconfidence in your process. To quote a phrase, “Never confuse brains with a bull market.” Through late 2017, many investors had crossed the line from bullish to euphoric. The rapid rise in Bitcoin was perhaps the best example of this euphoria - people just couldn’t imagine the market going lower. Once the market dropped Read More 

The Mindful Investor

Seasonal Trends Are Not Seasonal Certainties

by David Keller

“We’re entering the seasonally strongest part of the year.” “The New Year tends to be very good for small caps.” “Year three of the Presidential Cycle tends to be good for stocks.” “The Friday after Thanksgiving is usually a bullish day on lighter volume.” How many of these quotes have you heard in recent weeks? I have no doubt there is a cyclical nature to the financial markets.  I would even go so far as to say that there is a natural rhythm to the markets. Edward Dewey performed foundational work in the mid-1900s on the presence of cycles, not just in financial data Read More 

The Mindful Investor

When Emotions Take Over

by David Keller

I recently returned from a 10-day trip to Kuala Lumpur and Singapore. This was my first time in Malaysia, where I spoke at the IFTA Annual Conference along with my fellow StockCharts commentators Julius de Kempenaer and Martin Pring. After the conference, when I was checking out of the hotel in Kuala Lumpur, I was already thinking about the upcoming flight to Singapore and mentally preparing for meetings the next day. I distractedly reviewed the hotel charges and reached for my wallet. As I went for my credit card, everything stopped.  My credit card was gone. My Read More 

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