VIOLATING THE LINE IN THE SAND

January 9, 2008
By seadmin

Selling, selling and then a little more selling — that’s what we’ve seen so far in this young 2008, and by the looks of it, the selling isn’t over yet.

This market is operating under decidedly bearish skies, and we can confidently say that the long-term trend in stocks is now markedly lower. In fact, the line in the sand we drew at 1400 on the S&P 500 has now been egregiously violated to send the odds soaring that we’re going to get smacked by a very grumpy bear in 2008.

Right now, approximately 70% of all stocks on the New York Stock Exchange are trading below their 200-day moving average. That kind of downside market breadth is really disturbing, particularly if you are long the major market averages.

For me, the breakdown in the S&P 500 below the 1400 mark (shown in the chart below) is the first real sign that we could be slipping into the grasp of a bear market.

The question for you, the individual investor, is what are you going to do to protect yourself? Are you going to hang on to your investments hoping they’ll get back into positive territory sometime down the road or are you going to act in defense of your money the way subscribers to my Successful Investing newsletter have?

Now, if you think the latest round of market selling has been relegated just to U.S. shores, you need to think again. One look at the chart here of the iShares EAFE Index (EFA) tells a tale of woe similar to that of the S&P 500.

It no longer is safe to simply park your money in broad-based international equities. The selling flu that’s hit domestic equities has now infected the globe. And although not every market worldwide has seen a decline of late, most large-cap international equity funds have experienced a sharp sell off.

One way to alleviate any pain and suffering your portfolio currently may be experiencing is to make sure you don’t lose any money in this market downturn. Preserving and protecting capital should be your primary goal right now, and the only way to do that is to reduce your overall equity exposure.

Reducing equity exposure according to the rules of a proven plan is what Successful Investing subscribers are doing right now. Our subscribers aren’t sweating this market decline, and the reason is we’ve already taken steps to protect ourselves.

If you’d like to find out more about how my Successful Investing advisory service can help preserve and protect your hard-earned dollars, click here.

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