Waiting out the Bear

Welcome back traders.

Well it was a nasty September and we are about halfway through the seasonal rough period for stocks.  If course it could get nasty any time with stocks, but its statistically more likely to occur during September and October.   As a mostly long-side investor, it was downright ugly at times.  Here are a few tips to help you get through it:

1) Look for Strength

As Cramer likes to say, there's always a bull market somewhere.  And for me the action seems to be in high growth stocks.  Autozone (AZO) is one such example, its up 28% for the year and looks unstoppable.  And check out how well is has been reacting to the Fib lines.

Another favorite is Facebook.  I use it every day and I don't think this is a better run social media company on the planet. It is also obeying the Fiblines very nicely and it seems like just a matter of time before it re-tries the 161% red line just over head at about 100.6.  This was a point of resistance above which is partially obscured by the chart label in the upper-left hand corner of the chart.  Facebook has become a monster and I think it has plenty of upside ahead.

2) Consider your alternatives

With interest rates so low, Stocks continue to be the only place to be.  Sure cash is safe, but it doesn't earn you anything and in the long term, high cash levels will eat into your account growth which is a negative.  Remember, a large portion of long term stock returns come in dividends, and you don't get paid unless you are holding the shares or the ETF.

3) Remind yourself of the fundamentals

Keep in mind that individual stocks only report earnings 4 times per year. Sure stocks are thrashed about by the general market, but this causes them to become mis-priced with respect to the the fundamentals.  But don't let the day to day fear and greed to distract you from the fundamentals behind your favorite stock or even the general market.

4) Turn off the monitor.

Several times the past several weeks, I just turned off the monitor because I could not take the pain.  But I know that (as sure as the earth turns) that the worst of it is going to be over a few short weeks.

By the way, you can get my Fib lines indicator for Thinkorswim for free, just send an e-mail to fx-mon@yahoogroups.com.

Have a great week and hang in there.