Taking Advantage of the Fear

"If you can keep your head when all about you are losing theirs..."  Kipling wasn't talking about the stock market, but it often applies. In recent days, the accelerating plummet has become such a rout that it is necessary to step back and look rationally and unemotionally at the numbers. The logical next support in the S&P 500 was 1825, and the market yesterday got just below that and then found some support. The 21-day Arms Index is at the most oversold level since last February, right on the bottom of that slide. Now, with all about us losing their heads, it seems like a time to be taking advantage of that rampant fear by judiciously buying stocks that have held well and even strengthened in the last few sessions. Such stocks give us an opportunity to easily ascertain protective stop levels and are likely to lead the way in a rally. I do not see a lasting upturn because of the damage done technically by the recent slide, but I do believe that there is room in here for good profit on the long side.

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