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Echoes of a Stock Operator: Quotes and Commentary Part 8

Chapters XVII-XXII

“I admit that I do get irresistible impulses at times to do certain things in the market. It doesn’t matter whether I am long or short of stocks. I must get out. I am uncomfortable until I do. I myself think that what happens is that I see a lot of warning-signals. Perhaps not a single one may be sufficiently clear or powerful to afford me a positive, definite reason for doing what I suddenly feel like doing. Probably that is all there is to what they call “ticker-sense”.”

“I have found that experience is apt to be a steady dividend payer in this game and that observation gives you the best tips of all. The behavior of a certain stock is all you need at times. You observe it. Then experience shows you how to profit by variations from the usual, that is, from the probable.”

Livingston describes the delicate balance between intuition and rational decision-making that develops after years of professional experience. This phenomenon, dubbed “ticker-sense,” can be interpreted as the subconscious mind synthesizing subtle cues that the conscious mind either overlooks or undervalues. The acknowledgment of these impulses underscores the professional’s capacity to process information in ways that transcend logical deliberation. Here, the subconscious is integrating knowledge and insight faster and perhaps more accurately than conscious thought can. I cannot confidently say I have reached this degree of intuitive compulsion in my own work, but I’ve noticed a growing subconscious awareness that can only be attributed to years of experience in the markets. 

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“I never buy a stock even in a bull market, if it doesn’t act as it ought to act in that kind of market. I have sometimes bought a stock during an undoubted bull market and found out that other stocks in the same group were not acting bullishly and I have sold out my stock. Why? Experience tells me that it is not wise to buck against what I may call the manifest group-tendency.”

This is an important principle Livingston operates by and for good reason. It is often the collective performance of a group of securities that serves as the critical indicator for making informed decisions. When a particular security is not doing so well, or when a larger group of similar securities is not performing, there is something wrong that is not yet known to the public but exists below the surface. Sometimes it is as simple as lack of interest compared to more exciting or promising issues. At other times it could be the result of some deeply fundamental problem which has not yet been made public. In either case, when price doesn’t behave as it should, stay away.

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“Don’t forget that on the way down there are many holders who wish to heaven they had sold theirs but won’t do it three or four points from the top. Such speculators always vow they will surely sell out if there is a rally. They put in their orders to sell on the way up, and then they change their minds with the change in the stock’s price trend.”

“The top is never in sight when the vision is vitiated by hope.”

I have seen or heard other traders make this mistake so often I wonder if it is a law of human nature. The hope that speculators feel the moment a bounce occurs is rather strong and will drive the individual to abandon their reason for the possibility that the rally is back on, regardless of price structure and general conditions. This determination lasts just long enough through another sell-off and soon the speculator finds themselves back where they started, albeit with a larger loss. They vow to sell on the next rally and on goes the process of hope followed by regret followed by hope. It eventually gets to a point of maximum pain where the individual throws up their hands in despair and sells to recoup what they can. Ironically this capitulation often occurs right at the bottom. 

NOVEMBER 3, 2024 OBSERVATIONS

As discussed in prior weeks, broad equity price action will remain choppy around the top until the election results are clear. The worst-case scenario would...