Haven’t we seen numerous examples in the past where a weakening market gets hit with additional bad news out of left field, which accelerates the market’s descent? The tragedy in Japan is serving a brutal lesson to those last few stragglers who ignored their sell rules, thinking they could withstand the current selling. A manageable 5% loss on paper thus quickly becomes a 15-20% loss which can turn into a devastating 30-40% loss. In these periods, hope can kill an investor because it seldom gets better. The recent selling has hurt “long term investors” who believe in “weathering all storms” or have been “buying on the dips.” But those who have been adhering to the sell rules have been able to escape mostly unscathed.

 

If you are safely on the sidelines, be proud that your rules and discipline have once again helped protect your hard fought gains. Take this opportunity to help your fellow MarketSmiths by telling us which sell rules assisted you in your decision.

 

Most importantly, don’t assume this negative environment is over.

 

Scott O’Neil
President, MarketSmith