To all MarketSmiths: The last five market days have been tough. I stated in Tuesday's Webinar that we all got hit hard on Friday and were forced to lighten up on even our favorite positions. We talked about portfolio management rules and how deep an investor should be when the market gets difficult. I stated that I was still invested around 70% because several of my longer term positions would report earnings in the next several days. "If they reported badly, I would probably be close to all cash. But if they reported good numbers and the stock reacted accordingly then I would try to ride through this rough patch". IBD did change the market's status to "in correction," which I believe was the correct call given the market conditions. Although today is a strong up day, volume on the indexes is lacking and one day does not make a trend. We are not necessarily out of this yet.


Because we never know when the market will stop going down, we all recently had to reduce our exposure or back away altogether. In addition, the market could resume its downtrend from here, so we want to be careful when attempting to reestablish lost positions. Never allow one mistake to grow into a second mistake. It is not advisable to plow back in, in any situation. In fact, there is one stock I’d like to get back today, however, I know that won’t be possible. That’s the way it goes. We are in a marathon and capital preservation is always number one. For those that are out of the market and trying to regain their positions, just go slow and be precise on the chart.



There are no guarantees that we keep going up from here, so take it one day at a time and be careful.


Best returns,

Scott O’Neil


MarketSmith Incorporated

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