We have very choppy action with a strong negative bias Monday. The action suggests more downside to come as the underlying technical support is very week. The fact that this is an extremely slow time of the year doesn't help matters, either. Many market players will delay doing any major new buying until after Labor Day.
The key to navigating this market is to stay focused on keeping your accounts as close to highs as possible. This is the single most important thing to do if you wish to produce superior results. There is nothing more unproductive than making up losses, and if you keep accounts near highs, then you will have the power of compounding working for you as well.
The biggest mistake investors make in poor markets is failing to aggressively cut losing stocks. Understandably they continue to believe that the stocks they own are good picks and that they will bounce back quickly when the market improves. That is probably so, but if the current action morphs into a more dramatic correction, unrealized loses will build quickly and the effort to just return to even will be substantial.
Keeping accounts close to highs requires more effort, but the benefits can be substantial. Most hedge funds make their money by outperforming in a poor market. If they can do that, then they need not count on good markets to keep pace with benchmarks.
I've been a heavy net seller Monday simple because stocks are hitting my stops and I'm not seeing anything to buy. I'm holding about 70% cash right now. I'm not worried about the poor action, but I would be happy to see it continue.
The business media tends to characterize the market action as up is "good" and down is "bad." That is true if you don't manage your positions or take advantage of the inevitable cycles. To produce better returns, don't fight the natural ebb and flow. Just focus on keeping accounts close to highs and don't have to worry about market timing.