How To Handle The Bear Market Volatility
Simple, don’t do anything. Now by that I dont mean bury your head in the sand and pretend like nothing’s happening. If you’re trapped long wait for the inevitable bounce and make a respectful exit. There have been at least 2 chances to do this since the market turned south. Unless you’re a daytrader there’s no reason to try to be hero down here and call a bottom. Why is it that everyone always has to try and call a bottom? Why do we feel so compelled to be in the market and catch the absolute bottom that we risk our precious capital? There’s nothing wrong with admitting that this market is simply too volatile to try and time. I subscribe to the notion that as individual investors we don’t need to call the bottom. In fact, we’re much better off waiting for a new uptrend to emerge rather then attempt bottom-fishing the stock market. How many bottoms have we had this year? Everyone thought the Bear Stearns bailout was the bottom. Nope. Then we had another bottom in July. Still wrong. How many more bottoms do we have to have before people give up? That’s probably the magic question because when that happens we’ll truely have a bottom.
Having said that I have to admit that today felt a little bottom-ish to me as panic and uncertainty were everywhere and we had a huge reveral today with a strong close. I wouldn’t be surprised if we rally off the lows but I say sell into it. There’s no reason to think that the worst is over and that we can’t head lower. How many more institutions can we nationalize? How much worse can it get? No one really knows so until the market starts acting better, decrease your positions and trade small if you must trade.
Tags: bear market bottom, volatility
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