This morning, the lead headline on Yahoo finance says that Wall Street sees a near-term market top and could be headed for some profit taking. Are they stealing Top Equity’s stuff or what?
When the market turns sour, it is always the most difficult time for the average investor. The uncertainty of how much lower can it go paralyzes even the most savvy of market veterans.
Since most investors can only profit if the market and their investments go up, corrections can be a killer without a plan of action.
And that’s what we are going to discuss today, two ways we make the most of a red tape.
First and foremost, you MUST protect your downside. An old mentor of mine would say, “It’s better to be out of the market wishing you were in than in the market wishing you were out.”
Unfortunately, there isn’t a “right now is the time to get out” light that switches on at the exact moment. The next best is to know where support and resistance levels are for the stocks that you own.
In a down market, you might consider taking some profits or sell calls against your positions as your investments approach resistance levels. Typically, they are common reversal points.
Support levels are where stocks should stop heading south. If they should break through the floor, support usually becomes the new ceiling or resistance level.
Understand that Wall Street and the market makers know where these points on the charts are too. They WILL manipulate the stock price to attract buyers if they want to sell near resistance, and scare the hell out of you to sell near support if they want to buy. Place your stops accordingly with that in mind.
The next level up is to try to profit when prices fall. The easiest way is with inverse ETFs that go up when their corresponding index goes down. For example, ProShares Short S&P500’s (SH) objective is to make money when the popular index loses ground. For every 1% the S&P 500 backtracks, SH will gain roughly 1%. Just remember, the opposite is true when the S&P heads higher, the ETF will lose money.
ProShares offers many inverse ETFs that cover multiple indexes. TEN would suggest avoiding the leveraged versions that offer 2x, 3x or even 4 times the return and risk. We also view them more as insurance policies than a part of any long-term strategic planning.
From our standpoint, the two strategies outlined above are the easiest to employ and will help you sleep better at night whenever corrections occur.
Stock Market Trends: What to do When Stocks Go Down is an article from: 
