What, me worry?

Alfred E Newman

The Market opened lower this morning. I went shopping.

One of my stop-loss orders triggered, and when I looked in the Dow Jones Industrial Average (DJIA) was down sharply, but it seemed to hold. I started to look at some of the stocks on my buy list and, after watching for a while, noticed that they were recovering from their lows. Hmmm! Wall Street is having a sale. I made a few buys. They held right around my buy-price long enough for smugness to set in.

Then things started to go south. The DJIA moved steadily lower. And lower. Down 200. Down 250. Down 270. OK, if it gets down 300 points, then I'll worry. Then the bottom dropped out.

DJIA 27-Feb-07
The DJIA just before the close (1-minute bars)

I was chatting online and glanced over at my ticker which, at that moment, said "DJIA -588." I uttered an oath: Holy sh  t!

I was tempted to hit the sell button, but most of my holdings were up from their lows of the day. Miraculously, one was even going up. And, of course, I was delighted to see the shorts falling like a rock. "I can't bear to watch," I IM-ed, "I'm going to make lunch."

When I came back, the Dow had come back up, although it was still wa-a-a-ay down. I reasoned that if I sold at that point, I'd just be locking in the loss. There was no good reason for the sell-off, except that the market has been rising steadily without a correction for months. Greenspan did make a speech in which he uttered the R-word ("recession") but surely that couldn't account for such a big sell-off. China markets had sold off overnight, but there wasn't any other bad news (except that the Taliban missed Cheney with their bomb in Afghanistan). So I walked away and held.

In almost any case, there is going to be a rebound. At the very least, my losses should be mitigated.