Bear at the door ?

The very first question one has to ask when investing is where the market is heading to.  It is much easier to go along with the trend then to against it. True, one can always find gem in the ash, the chance is much slimer, and the effort greater.

Now that, market is 10% from the high, are we reaching the bottom? and will the market reverse like last time in last August? 

In my humble opinion,  not likely.

The reason is that the recession is a high possibility and there are evidences that the credit crunch and housing woes are spilled into other sectors of the economy.   So, the landscape of the market has changed, and the investors are not merely talking about corrections any more, in the back of their mind, they fear a bear market.  

How the bear market defined,   By one common definition, a bear market is marked by a price decline of 20% or more in a key stock market index from a recent peak over a 12-month period.  If that is indeed the case, there are more rooms to fail.

Of course, one can never underestimate the resilence of this market.  Also, there are a lot of talk of immint rate cut from FED, also, there is a earning season right in the corner.   Any positive surprise from one of these fronts could provide some support from this market.  However, the best bet is on defense for the time being.

Even if we get a bounce from the market, it is probably more prudent to watch whether the bounce is a for real or a trap for MM to sell more of their shares.

What we do then..

There are still places to place your money..   agriculture.  resource, gold or the utility.   I was smiling when someone called for short agriculture Friday on this DG.  because, it basically meant that the sector will go even higher due to the short covering.  and surely most of the stocks in the sectors recovered from the lows and mon, dba actually ended higher.

Or, just in cash..   Did somebody said cash is king back to October/Novmber...

Also, it is good time to prepare those stocks that be thrown out along with the bath water.. and depressed because of the irrational fear.

Any ways,  apply more cautions and be defensive.