Podcast Center
Video Center
Webcasts
Resource Center
Events
May 20, 2009 at 08:00 PM
From bottom to top – March to May 2009 – the Dow Jones (DIA) has rallied 2,217 points or 34.43 percent. This pales in comparison to the 7,839 points lost up until the March lows.
A golfer asked to describe a 55 percent loss would probably be forced to use the analogy of a triple bogey or worse. Really, when it comes to investing, the same as when playing golf, keeping your “bogeys” (high percentage losses) at a minimum is the most important factor.
After the recent rally, investors are feeling once again thirsty for stocks, and unlike the past several months, confidence in the American dream is blossoming. In fact, the recent rally and so called economic recovery have been described a true “green shoots.”
One lesson investors should have learned over the past two years is that confidence comes before the fall. Enthusiasm about future prospects penetrated the pre-October 2007 market top atmosphere, the very beginning of 2009 and even the months leading up to the Great Depression.
The ETF Profit Strategy Newsletter observed back in December 2008 that extreme levels of investor optimism visible above Dow 9,000 will lead to new lows below Dow 6,700. That’s exactly what happened.
Even though the market has not reached extreme levels just yet, the writing is on the wall. Now is the time to compile a list of ETFs that should be sold at respectable levels. Volatile sectors like financials and discretionary along with leveraged ETFs should be the first ones to go.
