Dealing with the inevitable...
Tuesday, March 13, 2007 at 10:00PM or dealing with the ugly.... whatever you want to call it, it is here and right in our faces. Perhaps, we had a very tiny bit of hope that we would not be visiting the low and get another leg down this soon. Wishful thinking? From the look of it today, yes it's wishful thinking that we'd be all hunky doray after the big selloff couple of weeks ago. So, it's a good thing we had a game plan and we had enough cautiousness to not let ourselves get surprised. Will today's action lead to further downside? From a technical point of view, you betcha! However, market timing is never as easily predictable as many claim it can be. Even though we all think that it should test the low again now and head even lower, there's still a possibility that it may not turn out to be the way we expect.
The bottom line is that we have to deal with this situation and stick with a strategy that has the highest probability of surviving this potential downturn. Our plan is simple and we go cash. We don't believe in hedge b/c if there isn't anything that needed to be hedged, why even go into the trouble of doing so? Let the billion dollar manager do their thing and talk their beautifull hedgin strategy on CNBC.... where as we, the common retail trader, will humbly stand on the side and watch the fireworks.
How about the flipping strategy and day trading strategy or Briefing headline trades? At this point, we think it's totally not worth our time or energy to pursue day trading opportunity when the market is at a major turning point. To be honest, most of the stocks (small caps wise) on our watchlist do not allow us to short them freely, even if we wanted to. Due to the lack of liquidity or simply lack of coverage, many of these stocks are deemed as unshortable in our book.
What should we do now? Well..nothing really different than what we've been saying since the Asian surprise. We wait wait and wait and keep an eye on the 52 week high list. There will always be some stocks that will stand out from even the worst kind of market and that's where we'll keep watch. Hopefully, we'd find some decent sized stocks with enough liquidity to keep us traders through this game. Basically, we're going to trade more of the safe and conservative kind and lean heavily on the cash side. This, of course, does not exclude the occasional and obvious hot story stocks that may provide us with a nice intraday swing or two. We'll just have to be very selective about that and be precise with our trades. Today was much easier to deal with and accept, this is because we stuck again to the stay cool..be selective...with smaller lots in your possesion. Hopefully you were prepared as well.
Can't wait to see the overseas markets reaction in the morning. Let's see..they follow us to the downside...then we gap to the downside?. The past few weeks we followed them.....This merry -go- round is out of sync. Each dog sniffing the others...Only good thing to possibly come out of this....is a helluva of a short term rally that could happen if the recent lows are broken and then we break them to the upside quickly!.
