Doing nothing has been a good strategy since April and it continues to be my core strategy. Besides having been a good strategy, I take pride in not participating in a market this corrupt.

I’m still holding my long positions in SO and CHL. I recently added a long position in BMY. My investing thesis right now is owning stocks with yield that are technically sound. Besides picking up some yield, I also believe that this is where the momentum is right now. If the market drops further, I would be willing to drop the technically sound requirement in exchange for deeply oversold companies that are not reliant on the debt markets. For example, Intel in the $16-17 range has support and would be yielding close to 4% (and no debt). Before I buy Intel, I want to see it drop more OR I want to see it regain technical strength. Put another way, I would buy it lower or buy it higher but I don’t like it here. Nokia is a similar.

All of that being said, my primary indicator China (FXI) as well as the major US indexes are all still technically broken. This means I might nibble on certain stocks here and there, but in general I’m doing nothing. I don’t see a great rush to get back in. I’m not in fear of missing the boat. The market is kind of like Intel. It needs to go higher and regain technical integrity or it must drop significantly below its 200/300 DMAs to create a valuation/technically oversold/mean reversion opportunity. I think we’re in a dead zone right here in terms of opportunity.

…

When people talk about unwinding corruption and bad policy, a common theme seems to be that the damage of unwinding it is too great.

High frequency trading serves no legitimate purpose. However, we can’t get rid of the thieves because the cancer they have created (and the regulators have permitted for the last decade)  is now a structural norm in the marketplace. The rest of the marketplace is held hostage by HFT because regulators are terrified of the unknown if they shut these guys down. Nobody wants to take responsibility for the outcome of ripping out the cancer in one big cut. And it isn’t just the risk of messing with the market structure, but the job losses and revenue lost from all of these trades. The exchanges (with their lobbies) don’t want to lose the revenue.

Housing is another example where unwinding bad policy is apparently too expensive. Poor underwriting is what has destabilized our banking system. Yet, rather than tightening underwriting standards to prudent levels, the cancer has simply moved into the FHA with its 3.5% down non-recourse loans (ie., ridiculously dumb underwriting standards). Of course, if we don’t fuel bad debt with more bad debt, housing prices go down further (to real levels that people could actually afford) and the economy in the short term gets even worse. So just like HFTers hold us hostage in the stock market, we continue to be held hostage to poor underwriting in the housing market. Unfortunately, the cost of the unwind is too great (and lobbies such as the National Association of Realtors are too strong). So we dig a deeper hole.

This morning news is out that mortgage refinances are up thanks to the Fed dropping interest rates even lower. This is supposed to stimulate the economy by reducing mortgage payments giving people more disposable cash to spend in the economy. The problem with this philosophy is that the lower rates only have a net benefit for those that have more debt than cash.

For example, think of the average baby boomer nearing retirement age. They can’t afford to invest in risky assets. Most of their assets are tied up in treasuries and high quality bonds. A couple that has $500,000 in the bank might earn only 1% on their money in this environment. This comes out to $5,000 to per year in interest income. In contrast, in a normal environment with a 5% risk free return rate this same baby boomer would earn $25,000 on their money per annum.

Let’s face it. $5,000 isn’t much money over an entire year even for the poor. However, $25,000 is a minimum wage salary. If you combine the $25,000 interest payment with social security payments for a couple, it is a pretty sound retirement. If the couple has paid off their house, it is a comfortable retirement. The lower rates make a huge difference. I’m sure retirees are not big fans of Obama and Bernanke these days.

Without getting into the justices of choosing to help the over-leveraged debtor class and speculators (e.g, commercial real estate investors on interest only loans that could not survive in a normal market), I simply question whether anyone has actually done the analysis to determine whether lowering the rates is actually stimulative? Especially in light of the fact that these lower rates are not always passed onto the consumer. The credit card companies are still charging debtors 20%. They haven’t lowered their rates. So much of this supposed stimulus is really just enriching the banks (the spread the banks earn increases).

The savers will certainly be spending less money. I hope all the debtors can replace their spending. Otherwise, the lower rates amount to a tightening. In my opinion, the proper question should be what is the optimal risk free rate to stimulate spending (balancing the interests of debtors and creditors). Unfortunately, most seem to operate under the assumption that lower rates equals greater stimulus. I’m just not so sure this assumption is correct.

I predict that a future generation (as many in this generation already do) will look back at the Fed’s purchase of treasuries at auction and shake their heads in disgust. They will look back and think how dumb and corrupt our government was (hopefully it will be past tense and cleaned up by then). Can we really expect to have a stable currency going forward when we buy and sell debt to ourselves?

There is always talk about China and the threat of what would happen if China stopped buying US Treasuries. But would it even matter?

Isn’t the current setup as follows:

1. Members of Congress have one goal. Get re-elected. The formula is simple. Give entitlements to people in exchange for a vote. And I’m not talking about welfare. I’m talking about using the housing market as a handout machine. Passing legislation to permit loans with 0-5% down instead of 20% down. Allowing people to take out loans for hundreds of thousands of dollars without any kind of documentation or any personal liability on the note. The housing market was the easiest way to transfer hundreds of thousands of dollars to individuals. This is much more money than any kind of welfare payment.

2. The US Government unfortunately does not take in more than it spends. Rather than balancing the budget like any household or business, it issues debt in the form of treasuries to make up for the difference.

3. Issuing debt and not balancing the budget is ok because Keynesian policy says that the government needs to step in during bad times to get the economy going again. Then in good times, the theory is that the debt is paid off.

4. Unfortunately, during good times Congress can’t cut entitlements because that will mean being voted out of office. Once you give people an entitlement, it is very tough to take it away. People always want you to take away the other guy’s entitlements. Not theirs. Moreover, the spending is so far beyond any reasonable sum during bad times that the good times can’t pay for the bad. I suspect that Keynes himself would feel his philosophy was hijacked.

5. More recently, the term “quantitative easing” has been invented. Issuing all this debt is “actually a good thing” because we’re in a deflationary cycle so inflating the currency and making it “worth-less” is not a bad thing.

6. To pay for the out of control spending, the US Government issues treasuries. In the good ole’ days, the debt was mainly issued to the citizens of the United States.  At least the government was in debt to its own people. Keynesian economics almost made sense back then. In a sense, the wealthy in the country bought treasuries and made an investment in the country. If the pump was primed and the economy gained steam, the wealthy would get their money back plus interest and also benefit from the stronger economy. But this justification only exists if US citizens are the primary purchasers of US debt.

7. In more recent times, the people of the United States as a collective had no money. At least not nearly enough to buy all of the debt the government needs. And how could people possibly have enough? After all, so much private debt was simply (ie., banks, General Motors) shifted over the government’s balance sheet.

  Therefore, foreign countries started purchasing treasuries instead of the people. Perhaps this is an oversimplification, but the point is that foreigners are the primary purchasers of the debt instead of the citizens of the United States.

8. Foreigners owning US debt brings its own problems. What will happen if foreigners stop buying the debt? How will the US pay all of its expenses?  What would happen if a foreign country uses the threat of selling treasuries in mass or simply not buying anymore as a means of economic war? Put another way, if the foreigners stop buying or sell in mass borrowing rates would rise drastically.

9. Finally, we get to the point where we are now. The people are no longer the primary buyer of treasuries. The foreigners can’t take down enough government paper for the US Government to operate.

10. So now the US Treasury is selling its debt to the Fed. There aren’t enough real buyers, so the government will in effect issue debt to itself. This doesn’t sound like true open market operations to me. True open market operations would be the Fed buying and selling securities in the open market to control interest rates. It is much different to simply become a buyer of newly issued treasury debt.

11. Of course, like any other entity, the Fed itself would only have so much buying power if it had a real balance sheet. The Fed earns income on the deposits that member banks are required to deposit with the Fed. The Fed’s income is not unlimited (at least it is not supposed to be). They shouldn’t have unlimited buying power. But, in effect the Fed does have unlimited buying power because its balance sheet is not audited. The income the Fed generates from member banks does not actually have to cover all the debt purchases it makes from the US Treasury. What the Fed earns doesn’t actually matter. The Fed’s income is whatever it wants it to be (ie., printing money).

To sum it up, we have the Treasury issuing debt securities to the Fed. Throwing out technicalities, both entities are the US Government. In theory, it wouldn’t be so horrendous if the Fed actually had limits on what it could buy (ie., a real balance sheet). Under that scenario, at least the Treasury would have to find real buyers once the Fed’s balance sheet was maxed out. But in bizarro land, the Treasury can issue debt to the Fed and the Fed can literally buy an infinite amount of debt from the Treasury (at least until some point in time other countries say enough is enough).

I understand this is the long way of saying “the Fed has its printing press going at full speed.” But when did this become even “kind of acceptable.” I hear pundits talking about quantitative easing and the Fed needing to buy more treasuries.

Are they insane? If this is where we are at, why don’t we just get rid of the Fed? It is really just an extra step. Like a video game, let’s just give Tim Geithner unlimited funds to pay for all the spending instead of making him go through this exercise of selling debt to Bernanke. Why even go through the motions of selling debt to ourselves?

And people on Wall Street want to know why the retail investor hasn’t come back. Why would anyone want to buy into this?

Many traders use a stop to manage risk. It sounds easy enough. Limit losses at the start of the trade by determining your stop out before you enter the trade. Let winners run. Yet, anyone that has traded even for a short while knows that the methods taught in technical analysis books for managing stops does not always play out so well in live trading.

I’ve mentioned several times that there is too much emphasis on studying entry points and patterns compared to the amount of time spent on learning how to set optimal stops. Setting optimal stops is almost an afterthought even though I believe it is much more important than finding a good setup. Moreover, often determining whether a setup is good is tied to whether there is a clean stop zone.

Today I’m writing about stops with just one simple idea. My practical experience tells me that certain stocks are much more “stop friendly.” Typically, the stop friendly stocks tend to be highly liquid names. Large caps tend to be more stop friendly than small caps.

What do I mean by stop friendly?

Before you enter the trade, look at the chart. Do you see a ton of gaps? Are there many trading days where the range expands greatly out of nowhere? Are there many huge spike ups or spike downs? These types of stocks are not stop friendly.

A textbook might tell you to adjust for the volatility of the stock. But from experience, these unfriendly stocks tend to have short term bursts through even the most generous stop out points.

I’ve I had thoughts about this many times in the past. But I’ve always thought that I could adjust my stop on these unfriendly issues to account for the wild trading. I think I’ve been wrong about this. I’ve noticed that these unfriendly stocks seem to account for a disproportionate amount of bad trades. With that in mind, I’ll be screening these stocks out in the future. A stock such as MEI (a recent stop out) will not meet my criteria in the future. Why deal with  sloppy trading stocks when there are so many stop friendly stocks out there?

In my prior post I wrote that correlation might be breaking down and that there may be a chance to actually pick some stocks. Since that post, the market picture has improved technically. The major US averages have moved over the 200 DMA and my prime indicator – FXI – has also moved over the 200 DMA. While this is not in itself an all clear, I am slowly adding positions. It is certainly worth giving it a good ole’ try in my opinion.

I previously mentioned that I added a position in CHL (mentioned here). Most stocks on this list are not ripe, but I did add MEI this morning (stop – $10.35). MEI is technically sound and recently had a flag breakout from a symmetrical triangle. Risk is easy to manage using the confluence of support of the bottom of the flag and the 100 DMA.

With the market working again, I’ll be looking at IBD over the weekend for some momentum ideas. I actually just kicked off my first momo position by adding AAPL. With the 20/50 converging just below the current price, it seems that it just makes too much sense to buy a little here with a stop at 1.5 ATR (around $254).

Yesterday I added a position in CHL. It is one of the stocks I mentioned a few weeks back. I would classify this market as moderately weak and non-trending. We’ve been going up over the past few weeks, but the longer term charts are still bearish (albeit perhaps turning).

Traders have grown accustomed to strongly trending markets over the past couple of years. In 2008 and early 09 it was strongly downtrending markets. In much of 2009, we witnessed a very strong uptrend. In a strongly trending market, almost everything correlates and simply playing indexes seems to make the most sense.

Right now, the market seems a bit different. Most charts are still broken. But there are some technically sound charts out there such as CHL. What is technically sound? Find a chart with longer term and shorter term moving averages stacked by time and in order (20, 50, 100, 200, 300). During a bull run, almost all the charts show this formation. In a bear market, it is all a mess. Not much help eh?

But in a non-trending market, finding a technically sound chart means a hell of a lot. A stock really needs to earn its stripes to be technically sound in this market.

I used this technique to buy SO a few weeks back. SO had a cup and handle breakout and has been killing it lately. Who would have thought a boring utility with a 5% yield would shoot up 10% over a few weeks?

All of that being said, I’m still waiting for the breakout on FXI before I buy into this market (I’m somewhat optimistic based on the EEM chart). But if that does happen, I’ll likely stick with buying technically sound stocks rather than indexes. While this doesn’t sound like rocket science (wouldn’t you always buy technically sound stocks), it has been a somewhat useless technique over the past couple of years because of the highly correlated market.

This non-trending market may cause the truly good stocks to show their cards. What stocks have you screened as technically sound?

Almost all financial pundits have an opinion. Typically, most pundits either through TV, newsletter or blog have some call to action. Buy this, sell that. There is always confidence and conviction (albeit artificial) behind every call to action.

You don’t often hear “relax and leave your money in cash until the market recovers technically.” Sure, you may not earn much interest on cash, but you will keep your principal. And when the market does come back, you’ll actually have cash to invest in the market, into real estate or whatever you desire.

Moreover, because of the government’s intervention, we’re likely to be in an environment of price instability for a long time to come. I expect that we’ll flip between deflationary and inflationary scares for several years. Right now, we’re in a deflationary environment where assets are getting cheaper. This is why so many investors are accepting 0-1% interest. If assets are deflating, cash is king and debt will kill you (think of all the homeowners that owe more than their house is worth). If you believe deflation will stick around for a while, holding cash at 0% in an FDIC insured CD is a great idea if you can buy a $400,000 house for $200,000 in a few years.

 I wrote previously that financial pundits and professionals have incentive to keep retail investors engaged. Unfortunately, the incentive driving them is often to the detriment of the retail investor. I’m sure many will be able to “trade the ranges.” Congratulations to this group. For most of us, trying to make short term trades to catch a trading range simply is not worth the effort.

I do believe the short side is ripe, but I’ve mentioned that trading a bear market is only for the seasoned trader.

I also wrote previously that China has been our indicator giving us a perfect exit in April. China has also been our signal to stay out of the market on the long side. Simple technical analysis such as staying out of the market with the major indexes trading below their 200 DMA has also been a great guide.

To conclude, if you left the market at the end of April, cash investments look pretty good.

Perhaps the greatest benefit of staying away has been all the additional time gained from not following the market. I spend about 10 minutes a week looking at the major indexes to confirm that we’re still in a bear.

This is not a political blog and therefore I will keep this post narrow in scope. Today the Justice Department filed a lawsuit challenging the Arizona immigration law. I’ll sidestep even discussing whether the law “invalidly preempts federal law.” I also don’t want to get into how illegal immigrants should be treated. I also don’t want to get into racial profiling.  That is way beyond the scope of this blog.

In this post I simply want to imagine if Mexican drug/human smuggling cartels were publicly traded companies. Imagine CNBC commentators discussing how the Arizona law might impact the cartels. Imagine if CNBC reported that the federal government was deploying troops along the border and taking a tough stance to shut the border down. I’m pretty sure that the stock price of these cartels would be crashing faster than BP stock. After all, their business would be in great jeopardy.

In contrast, imagine how the stock price of the cartels would react after the Department of Justice filed this suit against Arizona. I’m sure the stock price of the cartels would go up. Owners of cartel stock would be hoping for a continuation of weak enforcement polices. Perhaps affirmation of a weak enforcement policy might even encourage expansion of their business.

I think most people would agree that the objective of the Arizona law is to enhance border security.  I think most people would also agree that border security must be increased for obvious reasons. Even putting aside terrorists using Mexico as a conduit to enter the United States, the most obvious problem is the drastic increase in gang violence along the US-Mexico border as well as in cities across the United States. We don’t have to speculate whether a terrorist is crossing over into the United States (I think most would say some must be coming through, but let’s not even go there). We know these cartels are bringing gang violence into US cities from across the border. I think it is therefore reasonable to believe that a secure border (or a more secure border) would reduce the violence.

And this is not a new problem. This is from a National Geographic article from 2003.

The park rangers at Arizona’s Organ Pipe Cactus National Monument wear camouflage, carry assault rifles, and chase drug smugglers through the blazing desert. They’re at the front lines of a violent border war—and they’re losing.

In August, a park ranger, 28-year-old Kris Eggle, was killed while helping Border Patrol agents catch two men suspected by Mexican officials in a drug-related quadruple murder. The men had driven a stolen SUV through one of many holes in the fence that separates the park from the Mexican state of Sonora.

Now Foxnews has recently reported that federal parks in Arizona are closed due to drug trafficking and human smuggling.

The closed off area stretches 80 miles along the border and includes part of the Buenos Aires National Wildlife Refuge. It was closed in October 2006 "due to human safety concerns," the U.S. Fish and Wildlife Service said Wednesday in response to news reports on the closure.

Pinal County Sheriff Paul Babeu told Fox News that violence against law enforcement officers and U.S. citizens has increased in the past four months, further underscoring the need to keep the 80 miles of border land off-limits to Americans.

I will let people draw their own conclusions. I personally believe that if the cartels were publicly traded, that a secure border would kill their stock price. That sounds like a good result to me.

I will say that one very inexpensive action that the United States can do is a media campaign. Put it on TV, put it on billboards. If you use drugs, you are supporting the cartels and terrorist groups. I’m sure many people are so addicted or indifferent, that the campaign would not do anything. Other drug users that are more patriotic might actually stop buying drugs.

But what if the message got through to only 5% of drug users? Wouldn’t it be worth it? Isn’t it at least worth a try? This is something that could be done without even getting into politics or deploying the military.

Warning, we are in a bear market.

Using the 200 day moving average as a line of demarcation between a bull and bear, we can safely label this market as a bear. Further, many of the major averages are about to confirm the 200 DMA break by breaching the 300 DMA. IWM, QQQQ, and DIA all closed at their 300 DMA while SPY is already trading below the 300 DMA. FXI has been in bear mode for two months now.

This means that any long trade is going against the tide. I believe that most people should simply sit in cash for the time being. Seasoned traders can attack the short side and try a few ideas on the long side.

I preface this post with this warning because this post is about searching for a few long ideas. So where did I start? I decided to search for companies that offered an attractive yield (2% or higher), were not debt ridden, had a high return on assets (8% or higher) and were technically sound [quick note on ROA: back when I was a fundamental trader, I found ROA to be a good filter. The idea is also promoted by Joel Greenblatt.] Put another way, I was looking for some stocks for my retirement account. I don’t trade inverse ETFs, so other than cash, CDs and bonds, long stock positions are the only option.

One lesson I learned in 2008-2009 was that a seemingly good company could go from $50 to $5 in the blink of an eye if credit was cutoff. Before 2008, companies operated under the assumption that the debt market would always be available (e.g, commercial paper, bonds, credit facilities). When management thought about rollover risk, the risk was paying a higher interest rate upon rollover. Except for distressed companies, most managers did not worry about not being able to rollover their debt.

During the 2008-2009 crash, many companies were threatened with bankruptcy risk due to the fact that credit either became unavailable or was threatened to be unavailable. Without access to credit, many companies were threatened with being unable to meet their operating expenses.

The bankruptcy risk opened the door to the “junk long” trade in 2009.

When you are buying a sub $5 stock, the greatest threat is always bankruptcy risk. This is why you never want to just buy one or two “junk longs” and also why you have to keep only a small amount of capital in each junk long stock. The bet across the portfolio is that many of the companies will survive and rocket higher; however, you have to be ready for some busts. The 200-400% gainers will make up for the 70-80% losers. If you don’t have diversification and place large bets in these names, you can get killed.

While this was the trade in 2009, I’m looking to take a different approach in the coming months. This bear market is just getting underway and we’re along way away from having “junk long” opportunities again (we may never have this opportunity again). Instead, I’m looking for companies that don’t carry the risk of being written down from $50 to $5 due to credit risk. We’re still in a credit crisis. I’m willing to accept the risk of a company underperforming due to their product or service not meeting expectations. I’m not in the mood to see my stock crash because the company can’t get the credit it needs to meet general operating expenses.

On CNBC, many of the bullish commentators tout that “American companies are flushed with cash” as a reason for the bull market to continue. I’ve heard so many commentators state this, that I assumed that there had to be some truth to it. I’ve also heard many commentators state to “buy stocks with high yields.” Sounds sensible enough in a 0% environment right?

What I found is that many of the largest companies in the S&P 500 and Dow are flushed full with debt and just a credit freeze away from being a junk long stock.

AT&T (26.5:1 debt/cash ratio)

Verizon (17:1 debt/cash ratio)

Caterpillar (18:1 debt/cash ratio)

Kraft (9:1 debt/cash ratio)

Procter & Gamble (6:1 debt/cash ratio)

Walmart (5:1 debt/cash ratio)

The worst part is that stocks such as AT&T and Verizon are often viewed as “safe stocks” because of their brand name and high yield. Sure, these stocks generate a lot of free cash flow and the dividend looks safe right now. But make no mistake. These companies are being held hostage by their creditors. Look at AT&T. It owes almost $27 for every dollar on its balance sheet. If the company suffers any unexpected reduction in cash flow or loss of access to the credit markets, it will be in a world of trouble. The true fundamentalists can dig in and spend hours figuring out which debt is long term and which debt is short term (long term debt is generally less risky since it doesn’t need to be rolled over like commercial paper and other short term debt instruments). I’m keeping it simple. During a bear market driven by credit and debt issues, I’m going to stay clear of companies that rely on the debt markets. Utility companies are similar. They have very reliable cash flows, but are married to the debt markets.

Below are a few ideas (note: all figures are pulled from Yahoo Finance Key Statistics. If Yahoo has it wrong, I’ve got it wrong too). Keep in mind that the technicals are still crucial and the ultimate check. You certainly could have a company with low debt, a ton of cash, good cash flow, a good yield, high ROA but a tired and declining business (think Microsoft). Microsoft’s balance sheet is pristine. However, the company has a “has been” Windows and Office franchise and plays second fiddle in its other market segments. I’m not surprised that the MSFT chart is a mess. This is where many fundamentalists miss the mark. The technicals tell us that MSFT is junk and to stay away even if the balance sheet looks enticing.

RLRN in this bear market is still technically sound. That is impressive.  It is consolidating upward working to take out resistance at $16. RLRN has a yield of 2.10% and the company has no debt. Return on assets is 29.40%.

IDC is technically sound and has a yield of 2.40%. The company has no debt. Return on assets is 10.55%.

NTRI is still trading above its short and long term MAs and has a yield of 3.10%. Return on assets is 14.70%. The company has no debt. The company does have a super high payout ratio of 90%. However, I’m not too concerned since they are not using debt to pay their dividend.

CHL is trading sideways above its short and long term MAs. The stock has a yield of 3.40%. Return on assets is 13.43%. The company has 39.04B in cash and only 4.97B in debt.

Here are the stocks from my screener. Out of 38 stocks, only four made the cut. The others were ruled out due to poor technicals.

For those that left the market with me in April, not trading for two months seems like a pretty great deal right now. One thing I’ve tried to communicate in prior posts is that it is fine to stop trading for a month, three months or even a year.

Of course, there is tremendous bias against this approach. Why? There are a few reasons I can think of off the top of my head:

1. Your broker wants to keep you trading to generate fees.

2. CNBC is working to sell advertising. If they tell you to turn off the TV for a year, they’ll go out of business. This is why on Thursday they often have marketing people such as the guys and gals on the Fast Money show instruct you on “how to trade going into the weekend.” As if the “average Joe” with no real trading experience is going to be able to beat Goldman’s computers by making a quick trade based on the advice from Fast Money.

Even worse, the reasons provided for making a trade have no real analysis. For example, you might hear “I’m buying oil since the drillers in the gulf may not come back for years.” As if the market hasn’t already processed this idea. And what if the drilling moratorium is lifted? Cramer is another marketing professional. He sells books and is generally a funny guy. Some of what he says is useful. Some of what he says is appalling. One example is when he advises to average down when you buy a stock. This works great in a bull market when the market bails out everyone. It is a recipe for ruin otherwise.

3. Your favorite financial blogger usually has some vested interest in keeping blog traffic up. Sometimes it is obvious. Perhaps the blogger offers a subscription site. Whatever the reason is, the blogger will lose traffic if they don’t blog everyday. So just like your broker and CNBC, your favorite blogger is usually slanted towards pushing you to trade and take action.

For most traders and investors, these three voices often have a lot of influence. Unfortunately, often at great peril to the trader/investor.

To sum it up, collecting 0% doesn’t sound great, but it beats losing money. Moreover, in the midst of a credit crisis, picking up FDIC insurance should not be taken for granted.

This market has been broken for a while now. Why participate? For seasoned traders, there is opportunity on the short side. The short side is finally ripe. But for the non-professional retail trader, one of two scenarios will happen:

1. The market will go down and you will be able to purchase stocks at cheaper prices. This means buying with a better risk/reward profile.

2. The market will move higher and will regain a technical base (major indexes trading above 50 DMA and certainly the 200 DMA). While you won’t buy the low, you will be able to buy with a better risk/reward profile. The downside risk will be lower when this occurs and you will be buying when there is positive momentum on the long side.

For now, enjoy the time away from having to deal with the market. And if you are a seasoned trader, good skill trading this bear.