Everybody Panic! Its The End Of The World! Again…

Panic!  Panic!  Everybody PANIC!!!

Ok…  Now that we have that out of our system, lets put things in perspective.

It isn’t the end of the world.  It never is.  Not yet anyway…

When the end of the world does come, we probably won’t worry too much about trading the market.  Life lessons will be important.  So every time things get bad out there, lets watch the market and learn the life lessons of how things work.  From these lessons we will learn how to make the best of things during the worst of times…

So as the European Union appears to crumble and markets around the world fall, we want to look for opportunities.  No need to rush in but as stock prices fall but we want to watch, listen and look for opportunities.

In my case, I am lucky to be in cash as the markets fall.  This is the point where the marketer in me should point out to you that I am a genius to be in cash as stock prices fall.  That is the point where you look for the other side of the story.  You want to remember that I missed the last rally.  I was in cash then too.  Prices go up and down and no one can predict the future.  So we have to learn to play the trends in a given time frame and protect ourselves when we are wrong…  I have been too protective 100% in cash (except for a few cents worth of the F Options, remember them?).

So what to do?  In my retirement accounts, that are not the subject of this blog, but I mention for perspective, I leave them alone.  Let them ride.  Mostly in safe long term stock funds, some small cap stuff and some international.  No trading there.  Only long term dollar cost averaging into the equity markets in good times and bad…

In my trading account, the one that is the subject of this blog, the one that is my “play money”.  Pay to play?  Pay for an education?  Here I am 100% defensive.  100% cash.  This has been a good thing.  Temporarily.  In this down market.  But the market will change, so we must adjust accordingly.

So the stuff on my shopping list, that looked cheap last week, looks cheaper this week…  So buy, Buy, BUY!  Right?  Not so fast.  It looks like the trend in the market is down and the mood of the market is bad.  So I am guessing the trend will continue down.  I look at charts for big indices for a few years, a year, a quarter, a couple weeks, a couple days and then intraday.  So I start from a big picture and zoom in.  Look at the tides, the waves and the ripples…

At this point, my guess is that the trend will take the markets lower but soon there may be a reversion to the mean.  Most traders watch a move and then look for the retrace. That is the trick.  Will it come?  When?  How strong?  How long?  You never know but you have to make an educated guess about the market and how it applies to your life and your stock picks.

So right now, today, this minute, it looks like this to me.  The long term trend is up and pretty strong.  The medium term trend, is up and down, no trend there, just flat.  Short term the trend is down, pretty strong.

The market mood is bad…

I am guessing the trend will continue down but I am ready for it to turn up, in the short to medium term.

So since most of the stocks I look at are held by a good percentage of institutional investors, they will track the overall market pretty well.   Others I follow track the market but swing up and down more than the market.  That “swing” is measured in beta.   So if I am looking for stocks to hit bottom, I want to pick the exact bottom and buy the highest beta stocks to maximize the price appreciation as they bounce off the bottom.

Since you can’t predict the future you never know when the bottom will be.  So you have to hedge your bets.  Diversify the stocks you trade and ease in with different trades over time.

So I will be watching.  Might buy a few stocks here and there just to get back in.  It might be a little early to get in but it is probably better to get in and be in early and ride through some bottoming, rather than be too cautious, wait too long and totally miss another rally.

So will Euro Zone strife bring the market down more or will a Facebook IPO rally take us to a new bull market rally.  There is so much to consider and so little time.  Time.  It is time for me to get back to work!

Originally Posted on May 18, 2012  (Before System Upgrade)