Dispel Your Misplaced Market Fears

"You're the real tough cookie with the long history
Of breaking little hearts like the one in me.
That's OK, let's see how you do it.
Put up your dukes, let's get down to it.
Hit me with your best shot. Fire away."

-- Pat Benatar

These lyrics from one of my favorite female rockers describe exactly how I feel about Mr. Market right now. I'm getting really tired of his head games and I am ready to stand up to his constant bullying. Put us in the center of the ring, and only one of us will walk away without serious damage.

OK, that would be a big mistake because you can't fight the market without losing. The fact is, you can't fight the market at all. That's one of the great wisdoms of swing trading, especially in tough times like these. Rolling with the punches not only saves life and limb, it can also put a few bucks in your pocket.

Is History Repeating Itself?

But I didn't expect to run straight into a 2002-style selloff in the middle of 2004. That's exactly what it feels like right now. In case you've forgotten, the market lost its resilience in the spring of 2002. This triggered a descent into oblivion that didn't end until that day in October when we cried "uncle," and the bear market ended.

OK, it would be a big mistake to compare this year with the dark soul of that bear market. The fact is, your anxiety level right now depends on when you joined the bull-market rally. No doubt you're hurting badly if you waited until January 2004 to get aggressive with your stock purchases. It took only one or two weeks to get trapped in a major correction.

But I never suspected it would get this nasty. I thought employment growth, higher profits and better-looking charts would keep the dippers buying the dips with greater conviction than we've seen thus far. It's no wonder that some folks are now pounding the table, telling us the next bear market has already begun.

OK, it would be a big mistake to think this is anything worse than a bull-market correction. The fact is, these lunatics always come out of the closet when the market's pain ratio rises. It's no secret they feed on investor angst because they don't believe in the markets -- and never have.

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Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. At the time of publication, Farley did not have any positions in any of the stocks mentioned in this article, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback and invites you to send it to [e-mail]. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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