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MrTopStep has been very clear about the direction of the stock market: we think it's going up. I remember a chat Danny and I had back when the S&P (SPY:NYSEArca) had just broken 1700, looking across the street, past the "L" tracks, at the CBOT building. Danny said, "I think it's going to 1850."

I had just mentioned I saw 1805 and 1830 on my chart. I went back to the chart and confirmed what Danny's 35 years of intuition and experience had told him. 1850 is going to happen.

Does that mean you just buy and hold index futures or a stock ETF? If you have deep pockets or don't want to check your portfolio often, maybe. But there will be a lot of volatility along the way, as traders play hurry up and wait, waiting for the next piece of important news. That volatility will mean added risk for everyone and rewards for a few.

Today's big news event is likely to be Fed Chair Ben Bernanke's speech at 1:30 PM ET. Then again, the consensus is that we know what he will say-no taper yet-so the speech will just start what was going to happen to stock prices anyway.

If it's news, it's old

If you trade the news, you've got a lot to choose from. Some of it might even be true.

Citigroup, BofA, and other banks are hoarding cash and slowing their purchase of treasuries, on worries that the Fed will be tapering its purchases as well. Well, if they have a lot of cash on hand and they don't want to put it into bonds, then stocks are probably what they'll buy.

The Bank of England is talking about ending its stimulus measures because they are more confident about the British economy. China's Manufacturing index came out higher than expected, pushing Asian stocks higher. Asia is, more often than not, a prelude to the U.S. markets' open. China being the world's second largest oil importer, the news has also given crude a bump.

Shoppers may soon discover that most Black Friday bargains are actually a sham and nearly all major retailers post a higher profit margin on these days than average.

Some retailers have to be extra profitable, to cover some unplanned expenses. Wal-Mart (NYSE:WMT) has hired extra security guards to stop the rash of Black Friday brawls over crappy $40 tablets and cheap gifts for relatives they don't like. Wal-Mart still hasn't paid the $7000 fine for the 2008 death of a shopper in a stampede.

There is one important piece of news, which will likely get overlooked in the short attention span theater this week. Rather than using low-interest credit to expand and hire new people, large companies are firing workers and reducing compensation.

Overall, the Obama economy has added jobs for 44 months straight. But unlike previous recoveries (and like the slow pre-war recovery from the Great Depression) the job growth has been disproportionately the work of small businesses and start-ups.

Major corporations, whose goal is to please shareholders at the end of every quarter, are choosing to cut payroll costs to make quarterly earnings look good. All but the looniest economists agree that this is bad for the economy in the long run. Even some CEOs agree. But major corporations still drop people to raise profit, adding to the bubble.

The New Capitalist definition of "economy" is "a system for helping people create opportunities to do their best and most fulfilling work." By that definition, this firing of employees to hoodwink shareholders into thinking you're profitable is terrible economics and bad business.

What you cannot change, what you can, and the wisdom to know the difference

So what are we to do, when we have information overload made worse by unreliable reporting and outright propaganda? How can CNN remain the "most trusted news source" when even their couch is sponsored by BP? The answer trend-followers give is that the news is already priced in, long before it becomes news. In other words, if it's news, it's old.

Therefore, the wise strategy is simply to follow the trend. Don't try to predict with 100% certainty, don't chase it, don't get emotional when it fluctuates along the way. Just follow it. The market will tell you what is likely, but never certain, to happen. This is a matter of probabilities. Remember, the only thing bought and sold in any market transaction is risk-not crude oil, not corn, not the rebundled mortgages of middle class families who have been lied to-but risk. Trading is not just a risky business. Risk is our business. We don't fear or crave it; we buy and sell it.

What can we control and be sure of, amidst this blizzard of "couchable" news? A method we trust in, because we know it's trustworthy. A while back I asked Jack Broz, one of the most consistent traders on the CME floor, how he stays so cool even when everyone on the floor is freaking out. He said, "With experience, you develop a method that you know works. Then you can trust it to do what it does and you don't second-guess it."

Invictus

Out of the night that covers me,
Black as the Pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.

In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeonings of chance
My head is bloody, but unbowed.

Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds, and shall find, me unafraid.

It matters not how strait the gate,
How charged with punishments the scroll.
I am the master of my fate:
I am the captain of my soul.

William Ernest Henley

The other thing we can control is attitude. Am I going to go chasing after every bit of news, every rally or sell-off that the algos create to run the stops, wash out the scared and stupid money, then come back to where the price was an hour before? No. Don't chase markets, especially not on a week like we're in for. Let the market come to the level you picked as your solid footing.

So I will focus, not so much on the news as on the two things I can control: attitude and risk.

You have options

I'll be focused on limiting risk by using options. It's not the only way or the best way. It's just the way that will work for me this week. There are several ways you could use options this week. A bull call spread in the e-mini S&P or crude oil would allow you to weather the volatility. Give up the false attraction of "unlimited profit potential" and go for the solid profit it can give you while it reduces downside risk.

If you're trying to decide whether Japan's positive economic news will be overshadowed by China's and whether this means the yen will finally go up, cheap out-of-the-money calls with plenty of time on them is a way to be in the game with controlled risk, as well as a hedge if you are shorting the futures or playing the Yen-Aussie carry trade. You'll find similar opportunities in every market. Corn is at record lows right now, for example.

I can't tell the market what to do and I can't control China. And I'm not Ben Bernanke's speechwriter. And not even the Fed can get the banks to start lending and companies to start hiring and stop firing employees. But I am, as the line goes from Nelson Mandela's favorite poem, "Invictus," master of my fate and captain of my soul. Or to put it less abstractly, I can choose to focus on following the trend and controlling risk using a sound method like options. I can choose to ignore the trivia of cable news and the temptation to fall into fear and greed.

If you'll forgive a little rhyme with my reasons for urging caution in what is going to be a stormy week in the markets: I shall blend with the trend until the end, when it bends. I will not pretend that I comprehend what the market portends. Not even Ben can force banks to lend or employers to spend. On cable news we cannot depend to do anything but offend and condescend and pull stories out of their rear ends. I recommend that you, too, follow the trend, my friends. And ignore CNN.

Source: If You Trade The News, Which News Should You Trade?