Bypass the "Bear" Trap (Part 1)

09/08/2008 12:00 am EST

Focus: STRATEGIES

Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

In the midst of every major correction, experienced traders always look for telling signs of possible bottoms-events that signal pivot points for the market. One such development is the sale of the Prudent Bear Fund (BEARX) to Federated Funds (FII).

When Wall Street's most vocal short-sale mutual fund manager, David Tice, decides it's time to sell assets tied to the bearish case for stocks, one has to wonder whether he sees the easy downside money already made and the landscape for shorting stocks more difficult down the road after such a sharp pullback in the major averages.

Just as venture capital firms Fortress Capital and Blackstone (BX) went public last year right before the market topped out, let's hope this sale of the Prudent Bear Fund will prove to be a contrarian indicator that signals a true bottom.

STOP BUYING STOCKS ... FOR NOW, ANYWAY!

I'll tell you how you're not going to make money in this market, and that's by buying stocks.

I say this as a professional trader with almost 25 years' experience in the game, and a swing trader at heart. Nothing makes me happier than putting on a quick trade and banking big gains in the space of a couple of weeks. Moving from one position to the next, riding on the success of your last great trade, is exhilarating and, let's face it, downright addicting.

But in today's market, it's impossible to even go on vacation for a couple of days without coming back to find your positions in the red. You've got to be on top of your trading account even when the rest of your family is beckoning from the beach.

But if you play your cards right, you can afford to take another vacation to make up for the one you had to spend the whole time behind your laptop!

More in part 2 tomorrow.

Related Articles on STRATEGIES