Is this market bottom for real?

So do I believe the bottom is for real? No. The scenario that seems most likely
to me at this point is that last week’s bottom will hold for at least a few
weeks. After some minor rallying or sideways jiggling, the next leg down will
begin, and that move down could possibly set up a sustainable bottom. Does it
matter what I think? Not at all. Have I been wrong before? Yeah, probably close
to half the time. What I (or anyone) think isn’t important. What’s important is
what I do about it. So here’s what I’m DOING:

1) Maintaining and continually researching a list of short candidates. Sharp
run-ups like today can lead to some nice short opportunities in a bear-market
environment. (I still think we’re in one.) I’m continually looking for low-risk
entries.

2) Rebuilding my list of long candidates. The follow-through day gives the
market a chance and as I noted above, I’ve been wrong before. Following my
discipline has made me a lot more money than following my gut. Preparation is
paramount to be able to take advantage of a situation. (In this case a potential
bottom.)

3) Some of my firm’s proprietary quantitative techniques have identified Semis
and Small caps as 2 areas that could outperform over the coming weeks and months
if this does turn into a prolonged rally. (Note the qualifier — “if this does
turn into a sustained rally”.) Those areas will see extra focus on my part.

4) Lastly, I will change 1 of my approaches to trading in “bear-market mode”
(see recent columns for explanation). I will begin once again to let partial
profits run on the long side. Not as much as I would if I were more convinced —
but some none the less.

Best of luck with your trading,

Rob