Thursday, September 11, 2008
In boxing, they call it a standing eight count.
The fighter gets hit with a punch that's not quite hard enough to send him to the mat. But it's enough to cause the referee to step in and stop the fight for eight seconds.
It's a welcome break, and it's what most investors need to take right now.
The stock market has pummeled both bulls and bears alike. And trying to trade this market has been like trying to go toe to toe with Lennox Lewis. You might last a round or two. But Lennox is going to win the fight.
Sure, the market rallied yesterday. And if you bought stocks at the end of the day on Tuesday, then you're happy with the results.
But who in their right mind did that? Most stocks sold off hard early this week, and there wasn't much action to encourage investment.
The stock market is not rational right now. Stocks don't go up or down based on fundamental or technical factors. They move at random.
And there's no sense to it.
So as a trader, buying or selling stocks right now is like stepping into the ring against Evander Holyfield in the prime of his career. It doesn't matter how good your jab is.
You can stick your chin out and take the punch. And maybe you can last the round. But most people will be down for the count.
Traders can't afford to suffer a knockout blow.
So when the match is out of hand, and what used to work doesn't work anymore, then traders need to step away from the fight and take a standing eight count.
A standing eight count gives you time to rethink your strategy, gain your composure, and figure out the best way to get back into the fight.
And for most traders, it's the right strategy right now.
Best regards and good trading,
Biotech still raging... ImClone hits new 52-week high on takeover offer.
China's down 65% this year and dropping... China Cablecom, Chalco, Gushan Environmental, Xinyuan Real Estate, China Digital TV, and China Direct hit new lows.
Total destruction in mining... big miners Cameco, Anglo American, Yamana, Southern Peru Copper, and Goldcorp at new lows.