"Be prepared" is the best two words new investors will learn from time in the markets.
The second you think you can "guess" where things are going will be when your portfolio suffers because of your assumed clairvoyance.
One of the biggest issues we face today as investors/traders/speculators is the glut of information available to us, most of it conflicting in some way, shape or form. At one stage a few years back, I was reading 20-30 articles a day from various sources. It did my head in and my portfolio reflected the confusion I was mentally going through. Although some commentators agree on their outlook, their timing is different. Some say the timing is the most important aspect to sound investing.
Whatever the case, preparation is the best defence you can have for your portfolio. You should be able to cushion small amounts of capital loss without being stopped out while the market goes through periods of consolidation. I prefer to the use that term, rather than correction - what do you call upwards movement in a downward trend, a reverse correction? No, so the use of the word correction is somewhat a defunct word that the media uses to sensationalise things.
A broader view of the markets, spanning decades will help you to develop a long term outlook for the markets, not a short term outlook. Even in the medium term, things like moving average crossovers have been shown to be effective in managing the trend. But really, being able to pick short term movements is a mugs game and you're a mug if you think you can do it. If the risk of a down night on the DOW causes you to lose sleep, then you're either too heavily invested for your investing profile or you shouldn't be investing.
And also regarding the comments about using the DOW as the bellweather index - using the DOW for investing guidance is like a mechanic using tools from k-mart. If you use sub-par tools, you get sub-par results. As a minimum, the S&P should be your index of choice. You will note many times where these indices have diverged. The overweight nature of the DOW means it can be skewed.
Good discussion - I think it's safe to say that most posters on this forum have short to medium term horizons. I would say that a lot of people would be sitting there disagreeing but you simply need to look at the read totals of the most highly traded stocks and comments from posters to understand that the majority are looking for swift gains, not patient holds. With this greed comes a fear of losing, it's only natural but that is why you will continue to see comments like "timmmbbbeeeerrr", "crashing", "look out below"... etc.... when the markets go down for one or two days.
Strauss makes a good point though - if it helps you to sleep at night, if you think the market is overdone, then you scale back how much you're invested. Have a follow up plan in place, though, to then rescale your invested cash once the market shows signs that the upward movement in the market appears to be holdings it's ground.
The warnings are sound, but let's be honest, when the markets were 50% lower (for some indices), every day since then we've been hearing the same warnings. You've got imbeciles like Robert McHugh of the Technical Indicator Index saying for years that the crash of the century is coming. It's all well and good to make those sorts of wild claims, but look at what he's missed out on in the mean time - think of the money he's cost his subscribers.
