I remember waking up one morning in early April of 2000 and...

I remember waking up one morning in early April of 2000 and found that the Nasdaq had lost 75 points overnight, pretty good considering how shaky the tech bubble was looking at the time. Looking beneath the number, though, revealed that it had actually lost 575 points intraday, and recovered 500 before the close. People read all sorts of positive news into this, but they had forgotten what true volatility looked like, and what it foreshadowed. The Nasdaq went on to lose 3000 points when the bubble burst later that month.

Not quite the same, of course, as we're not in a bubble, even though markets have done very well since March. But this sort of volatility is not normal, tiny tidbits of news causing huge ups and downs in the market, in a single day. I'm not calling it up, down, or finished, but volatility is not a trend. It's volatility. It could be a warning sign.

Remember that 15% of Americans have non-traditional mortgages. A lot of them borrow against their homes to buy shares. This could lead to a vicious cycle of forclosure and forced share sales. We're different but all markets follow the US down. Last I looked, Hong Kong was still down 4% for the day. Tomorrow could be a bloodbath if we're the only optimists in the world.

I'm not in BHP right now but have followed it religiously in recent years. The P/E, cost base, China/India story etc are all good, but in the short term, just set your stop-losses and wait for a trend to emerge.