Tight Stops Please

We had the midday reversal yesterday and the selling continues.  At 1:50 p.m. CST, we have the Dow down over 200 points.  We’re only seeing strength basically in commodities.  Gold, silver, oil, natural gas, and agribusiness are all strong today. 

Make sure you have a sell strategy in place if you’re long right now.  You need to physically go through every stock, mutual fund, or ETF that you own and establish a sell point.  I don’t like using physical price stops.  I use conditional stops.  They could be technical places.  Or, in most cases, I see what technical indicator has worked the best for each stock and use that indicator.  If that particular indicator turns negative, I sell.  If you don’t have time to do that, place a 3% stop or so underneath all your positions that aren’t long-term holdings or hedged.  As I get stopped out, I will probably go net short.

The market can erase a couple of months worth of gains in just a few days.  I’ve seen it happen.  So, your strategy needs to be put into place now so you’re not staring into the headlights like a deer.

The fear is picking up a little today but still way too many people that are bullish.  Be careful.


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May 2008
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