Aggressive Strategy August 3, 2007:

The markets are going to be more volatile than normal over the next few months so be prepared for some massive selling days and huge recoveries as well. The uncertainty in the global equity markets will last for months and as the credit markets tighten up it will be very uncomfortable to be invested in North American equities.

It will be much harder to define value over the next few months because what looks like good value now will be even better value next month. We are entering a long over due bear market and bear markets on average last 18 month. So don’t get too excited if stock prices fall to levels you think are attractive because that will be based on current relative valuations and those are all rapidly changing.

Build cash by selling any shot term rallies and moving stop loss levels up leaving less room if any on the downside. It will be frustrating to be a trader over the next few months as the trend will be down and trading from the short side will be the only way to make money. If you are not comfortable being short stay away until the market settles down and a bottom is well in place, don’t worry you will have lots of time to rebuild positions when the opportunity arrives.

Oh, it will not matter that the fundamentals of a company are sound or that the future looks bright, all share prices will fall during a bear market it is just a matter of how much. Patience will be rewarded so don’t move too quickly.