Last couple days were exciting. On Tuesday March 10th the market started a [tag]rally[/tag]. Finally, one would say. It was depressive watching the [tag]market[/tag] dropping further down every single day. So this weeks’ [tag]gains[/tag] make me feel positive. At least it provides nice feeling about the market’s long expected turn-around.

When looking at the chart, gains are really very impressive and even today I wasn’t expecting the market rallying again. Originally I didn’t want to write about the first day rally, because I expected immediate [tag]correction[/tag] next day. So is this the bottom?

However, there is nothing to buy out there!

When you look at the [tag]stocks[/tag] leading this rally, all are weak, almost unknown stocks and companies, or companies (mostly financial) which were beaten down by this [tag]crisis[/tag] and now they seem to be correcting their huge drop in [tag]price[/tag]. When you look to my previous posts about the [tag]stock market[/tag] you can notice I was writing about several previous rallies which all of them failed.

It would be nice if this rally attempt sparks the new [tag]confirmed rally[/tag], but I do not believe in it much and most likely I am expecting another failure. However, since technically I should consider the market as in rally attempt I have changed the market status to “Rally attempt”, but do not be too excited about it. I am not either.

Tip: It is not time to [tag]start investing[/tag] yet. Wait for the [tag]market[/tag] to confirm itself. This rally attempt can still fail. I would stay out of the market, watch potential [tag]winning stocks[/tag], add them to a watch list and wait. There always will be plenty of opportunities to [tag]buy winning stocks[/tag] when the rally confirms itself.

Today’s [tag]trading[/tag] was exciting. I didn’t have much time watching it, I just briskly reviewed it in the morning when it opened about 130 points below yesterday’s closing and later I could check it when the market was already closed. A [tag]300-point loss[/tag] was amazing. [tag]Dow[/tag] seems to be heading to a [tag]4000-point level[/tag] as Jon Markman mentioned once in his post.

When looking to to a [tag]chart[/tag] of today’s trading, seeing the market pushing its low limit to a 1997 level, this proves the [tag]strategy[/tag] [tag]buy & hold[/tag] to be wrong. If you ever applied such strategy, during this [tag]crisis[/tag] you would loose all you have been building for 12 years! And if you have started recently you may experience a loss of 50% or more (such as my 401k) and there is no prediction of how long your heavy bleeding [tag]portfolio[/tag] would remain locked in those losses.

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I think this is a great example and a lesson to every [tag]investor[/tag], that it is necessary to perform timing and when such similar crisis comes to a play it is important unloading [tag]stocks[/tag] from portfolio and move to [tag]cash[/tag] or [tag]money market[/tag] vehicles and vice versa. This is the greatest lesson every investor got the chance to learn from.

Another great lesson I have learned is that we should strictly follow the market. If the market says: Do not trade, then stay away. Unless you are a [tag]day trader[/tag], very experienced or [tag]lucky investor[/tag] able to feel the market’s pulses and be able successfully trading on both sides (shorting as well as be long) of course. In the history I know of only one [tag]trader[/tag] who was able to trade on both sides of the market – [tag]Jesse Livermore[/tag]. However even he refers to some of his trading periods as [tag]choppy market[/tag] which is wise to avoid.

Couple months ago, when I started learning about investing into [tag]stock options[/tag] I was also decided to start investing real money into [tag]cheap stocks[/tag] and trade [tag]covered calls[/tag] on those stocks. What a fool! I considered [tag]Citi[/tag] (C) to be one of those cheap stocks. I though I would just buy some hundreds of [tag]shares[/tag] of that stock and generate [tag]monthly income[/tag] on stock options. I somehow forgot that the stock might drop. At that time Citi traded at $7 a share (December 2008). By today it is $1.2, which is 93% loss! On my [tag]virtual account[/tag] I made roughly $300, but lost $1200. Is this worth holding such stock? I am not convinced about it much. I would prefer unloading such stock when it shows a [tag]sell signal[/tag] and wait for the market to tell me when to buy back.

Another great example is Almost Family (AFAM). In May 2008 it traded between $24 – $25 range. In June 20th, 2008 it broke up and rocketed up even though the entire market went down like a rock. It doubled the price literary within two months. Today it is trading for $18.92. You could make nice [tag]profit[/tag], but if you applied a buy and hold strategy, today you would be losing money. I entered a position of this stock in August 2008 when the market entered in to a rally (short live however) and I was impatient to start the new strategy as quick as possible. Later I realized it was wrong, but I forced myself to stick to my rules. Soon after, AFAM was sold on my rules. Today I can sleep in peace watching the stock falling incredibly down and being happy I am out of it.

There is a lot more examples proving that every investor should be watching her positions and [tag]actively manage[/tag] her portfolio instead of sitting on losses and apologizing herself that she is an investor, not trader.

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A week ago it seemed like the [tag]market[/tag] is already on the bottom and almost ready to turn over. However last week the market broke through its [tag]support line[/tag] and headed further down. It fell down without hesitating and some commentators celebrated its almost so called turnover on Tuesday last week probably in their hopes of turning market. It was just another fake created by proclamations of [tag]Obama’s administration[/tag]. No [tag]strong stocks[/tag] appeared that day and none of the leaders broke up. On a week-time-scale the market was unable to create new week highs and on Friday it even created the new low peak of this [tag]crisis[/tag].

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The [tag]stock market[/tag] is searching for its bottom and nobody knows when this fall stops. Once a friend of mine asked me when I told him that the market holds its support line what would happen if it falls below. Then we may expect a long journey to the bottom, was my answer. Here we go. This market is still not the one we want to be in. So stay in [tag]cash[/tag] if possible. It is hard to invest cash, since there is nothing to invest out there and the current [tag]money market[/tag], [tag]CD[/tag]s or [tag]savings account[/tag] earn so low [tag]interest[/tag]s that they are unable to match [tag]inflation[/tag]. However, it is better to have cash in any of the money market accounts or [tag]bonds[/tag] rather than loosing them on the market.

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