The situation we find ourselves in is difficult to say the...

The situation we find ourselves in is difficult to say the least. Lets talk stratedy for a moment.

The enviroment we are operating in is characterised by the following;

High Volatility.
High liquidity.
(Despite some poster's focusing on leveraged exposure, this is reality is a small % of funds available.)
Low interest rates.
Uncertain global growth.
Dow is weak and will probablly get weaker.
(But with every 2 to 3% drop the chance of a crash becomes less likely.)
Gold's going nowhere.
USD is weak and will probably get weaker.
Other asset classes hold little attraction except out of panic.

Hmmm; Sounds like a very well behaved bear market with the potential for several bear rallies fuelled by liquidity and absence of any upward movement of interest rates.

What to do?

Select small number of bluechip's and live trading cycles for short term trading range plays. Curtail profit expectations and employ stop losses.
My Selections at the moment are;
TAH,MAY,WPL,STO,AMP.(These change weekly)
Short trades supplemented by derivatives intraday with the odd exception of holding overnight.
Isolate small / mid caps with solid earnings growth (or
potential) and buy on weakness again shortening your trading cycle.
My selections at the moment are CSM,IHG,MRC,HDR,KIM,CPU,CUE,EIF,OSH,BSG.
Trade on market over reaction, this is a very powerful profit earner if you have the balls.
Keep up to date with commodity movements, mainly oil and gold as this obvouisly will affect your trading stocks.
Keep significant % of portfolio in cash, but don't be adverse to large commitments over short periods but not in derivaties.
Start taking the short side of the market seriously as trading by definition means up and down.
(This is a note mainly to myself, historically if I'm bearish I usually just cash up and ride it out. Have to get smarter at this.)
Remember, with this type of trading you are going to get it wrong more than once. Be brutal with your stop loss and ride your wins by a trailing stop loss.

Rob.

What are other people doing?