In periods of extreme volatility and intense moves, individual stock picking becomes less important than getting the general direction of the market right. This has been a vicious correction, and even the best stocks have been thrown out with the bathwater. The main thing to remember now is to play defense and protect your capital.
The Dow has lost close to a thousand points in a straight line on an intraday basis in a move that caught many investors off guard. It is a great bet that many of the best fundamental stocks in the market also took it on the chin during the downturn. That is simply the nature of the game. When investors are scared, they sell first and ask questions later.
So what does this mean? It means that good stock picking during this time is close to meaningless and getting the market direction right is everything. Those who went to cash or better yet went short ten days ago are sitting pretty while their bullish brethren are licking their wounds. These folks don’t have to worry about recouping losses and will be less emotional and ready to capitalize from the market when it is ready to turn higher.
75% Of The Time
I learned from market legend William J. Oneill that individual stocks move with the market direction 75% of the time. That means knowing the bigger picture is one of the most important things in order to make money. Obviously stock picking is important, but in these scary times, it takes a back seat.
If you think the market will drop precipitously, raise some cash and buy some inverse ETFs if you want to participate on the short side. I like these better than outright shorting due to the unlimited loss potential of selling short (although your broker will close you out before it goes to infinity). Capital preservation is the most important thing to keep in mind and remember that individual stock picking should be left for sunnier days.
Stock Picking Taking A Back Seat is an article from: 
