Yikes

The market was going along poorly yesterday and then fell apart into the close. That dominoed across the planet last night except for India, the Czech Republic and maybe one or two others.

I don't think this is any different than what the market has been doing for a while now. In March 2004 the S+P 500 dropped about 70 points. In May 2004 it dropped about 70 points again. Last July/August it dropped 80 points. In the first two weeks of this January it dropped about 50 points.

All these down moves have had corresponding up moves. I've written this a zillion times; awhile back people predicted that we would have a range bound market for years. While no one can say how long we will be range bound it seems like we still are and this is what it will feel like. If you own names like Wells Fargo or Intel or John Deere (all fine companies that I do not own) you are not stuck with names that might not be here in a year. Your realistic risk is that you don't have the best stocks to ride out a bumpy market (realize I am not saying these are bad to hold, I could have picked other names to make the same point).

The market goes up and the market goes down in the short run. This is how it works. It will continue to work this way whether you react well or poorly to these swings.

It is times like this where being able to avoid emotional reactions makes sense for long term investors. Successful short term traders probably got out Friday.

I wrote at the start of the week about a stop order I placed for a volatile energy stock. After I placed the order the stock rallied up a bit more, worked lower yesterday and is close to executing. The strategy of taking some volatility and profit off the table may or may not be the best thing but clearly, if you read the post, the decision to place the stop order was not done with emotion.