Saturday, January 19, 2008

IBD Big Picture Gives Excellent Advice

I don't subscribe to the print version of Investors Business Daily (IBD). I find most of the articles juvenile and an insult to my intelligence. I do, however, subscribe to the, where I keep track of the IBD 100 and read the daily market update, The Big Picture.

Say what you will about IBD's bullish bias (look at any long-term chart and you'll see why that is a good idea), when the market turns they will never tell you catch a falling knife. Cash is king and they respect that.

In this weekend's IBD Big Picture article, Jonah Keri gives some excellent advice to those who might try to ride out this downturn because they own "high quality" stocks.

Individual stocks continue to tumble. Stocks that led the market's most recent rally have fallen especially hard. It's odd, then, to see analysts upgrade leaders that have started breaking down.

Research In Motion, (RIMM) Potash (POT) and Fluor (FLR) each garnered upgrades Friday. All three stocks fit the profile of the leader that has started to crack in heavy volume.

Analyzing the market's past winners shows how and when leading stocks top and start to roll over. These diving leaders are exactly the sorts of stocks you should be selling to protect your capital. Yet Wall Street continues to tout these names.

No one can know with absolute certainty which way the market will turn from day to day. But it's worth remembering the lessons of the past.

When Cisco Systems, (CSCO) Microsoft (MSFT) and others started selling off in 2000, many analysts urged investors to grab them each time they fell to new bargain prices. Those that heeded that advice learned a painful lesson: When the market goes into a downtrend, the only absolutely safe place to be is in cash.

Trying to outsmart the market has proven fruitless lately. Even defensive stocks like utility, food and beverage firms have gotten slammed. As it stands, this market has few, if any, safe havens.

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