This column was originally published on RealMoney on Oct. 7 at 8:24 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.A particularly poignant email popped up in my inbox yesterday, and I wanted to both share the message and my response.
Gary, talk to me. As a technician and trader, what do you do when the market gets this ugly? Punch out of your longs, double up your shorts and sit on cash? The overlying macro trends are not good right now. I feel like every decision I make on the long side is wrong. Except of course, shorting the homebuilders last week (9% of my portfolio), which seems like it was the right move. Also short some retailers and GM ( GM). When it gets this ugly and charts break down across the board, do you simply stick to your shorts? Hope you're making money. Peace, C.I.Believe me, you're not alone right now, C.I. In fact, I'd venture to say you're in the vast majority. Basically, though, what I do, and what I urge everyone to do is simple: persevere. By saying that, I'm assuming you already have a methodology that's been tested throughout periods like the one we're now experiencing. If so, all you can do is continue to execute that methodology. I know in my newsletter I've gone from having three longs one day, to three shorts the next day, and then no picks whatsoever the third day! In short, after a week of trading, all you've really done is enrich your broker. With that in mind, it does seem more logical to "sit this one out," but then the problem becomes one of knowing when to get back in. Sure, you get back in when conditions improve, but what exactly signals that event? If you have something tried and true, then by all means use it. However, most people don't have any "all clear" signal and so relying on your methodology and executing all the trades (long and short) you see becomes paramount. The bottom line? Good times, bad times or flat times, I just keep plugging along, knowing that eventually things will turn my way. Doesn't make periods like this any more pleasurable, of course! Today, charts for the Dow Jones Industrials, Phelps Dodge ( PD), UnitedHealth Group ( UNH), Sykes Enterprises ( SYKE), Merck ( MRK) and Activision ( ATVI).
Charts produced by TC2000, which is a registered trademark of
And that is the final word from 50th and Madison, where I still don't get those pharmaceutical ads. They normally come at you with, "Flowtrase. Ask you doctor about it." This begs a few questions. 1) Does anyone still have a regular doctor? 2) If so, do you speak to him or her more than say once a year? And 3) If so, would you in your wildest dreams ring him up and say, "Hey Doc, tell me about Flowtrase"? P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
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