Reader Nitin sent me an article from BusinessWeek called “Five Reasons to Sell, Sell, Sell.”

It lists five of the biggest threats to the current stock market rally, which include:

1. Earnings

5. Shiny happy investors

All of these are items which I’ve discussed in various posts and comments, and every one them has the ability to derail the current bull market. Some have actually contributed to last week’s sharp pullback. If you are a casual reader of these types of articles, you may be prompted to liquidate your entire portfolio, and possibly watch the major indexes resume their upward march for another 6 months.

And that is the problem with these stories. They may be correct in outlining all of the culprits that will always affect markets to the downside, but that does not mean such an event is imminent.

This is why I continuously harp on the fact that these stories have no value when it comes to actually making a decision regarding your investments. At the risk of sounding like a used car salesman (no offense), stick to watching the major trend and follow your trailing sell stop points. Those are real numbers you can use to improve your decision making process.

As I mentioned last Friday, those funds/ETFs that had barely triggered my sell stop points were slated to be sold today. This plan was subject to confirming further market direction to the downside at today’s opening, to make sure we would not expose ourselves to a potential whipsaw.

So far so good! The markets rebounded nicely and pushed our holdings back below the 7% sell stop level. I will wait with any liquidation until the sell points have been clearly pierced to the downside before taking further action. It is too early to tell whether today’s rebound was just a dead-cat-bounce or the beginning of another leg in the bull market.

Last week’s 4.5% market correction pulled the rug out from under most assets. Based on my ETF Master list, which contains 497 ETFs representing just about every sector imaginable, I was curious to see which assets held up best and with ones suffered the most.

While obviously all bear market funds/ETFs had an up week, it is too early to get exposure to that area since the long term trend lines of the Trend Tracking Indexes (TTIs) are still in bullish territory.

Bucking the pullback last week (not counting bear funds) were the following:

TF (Country fund): +3.42%
FXY (Currency): +1.98%
USO (Oil): +1.60%
IEF (Bond): +1.41%

The only equity ETF to stay even was DIA (Large Value: +0.00%), all others went negative. The honors for worst performance of the week goes to IIH (Technology), which dropped an amazing -11.69%. That was closely followed by XME (Metals & Mining) with a loss of -10.99%.

My point is that very few areas survived last week’s pull back. There is no sense in trying to make adjustments to your portfolio at this time, since in the current corrective environment last week’s winners can easily be next week’s losers.

Stick to holding your positions subject to your sell stop rules and make adjustments into better performing sectors at a later time once the markets have calmed down and the direction of the trend becomes clearer.

Right now the markets are in no man’s land, and it’s anybody’s guess as to whether we are heading further south into bear territory or whether a turn around to greener pastures is imminent. This is the time to be patient and avoid making irrational decisions.

Not too long ago, I read Lee Eisenberg’s book called “The Number,” which tries to answer the life-defining question: “How much money do you need to secure the rest of your life?”

Obviously, I am a very interested party in that subject since that topic seems to come up quite frequently when talking to readers and clients. While he has some interesting analogies, I had to read through over 230 pages before finally encountering something that resembled a number.

It was somewhat agonizing to be left in the dark for 17 chapters of what “the number” might be. Finally, after what seemed like an eternity, on page 234, the author displays the following table:

This week’s sharp downside market activity has left a lot of investors somewhat breathless and wondering if a repeat of last year’s Many/June debacle could be on the agenda again. Or, could it be just a one week correction that can be overcome within a 6-week period just like at the end of February 07?

While no one has that answer, there are a few things you can do to handle any market correction without the usual emotional impact. Rather than seeking psychological treatment, or finding the nearest “mixologist,” as shown in the picture, here are some that I have found helpful:

1. Reduce your news intake sharply. There is no need to listen to the talking heads on CNBC and other financial channels. Their hyped up views will do nothing to calm your nerves; besides, they don’t know any more than you do as to what the market will do next.

2. Make sure that you know where your sell stops are supposed to be and enter your orders “after” the points have been clearly penetrated. Remember, even if you use ETFs, for sell stop purposes I recommend you only work the with day-end closing prices.

3. View your portfolio with the right mindset. Say, the current value of your holdings is $100k. That is not really correct, isn’t it? Unless, of course, you had liquidated all of your holdings at that very day.

A more realistic view of the view of the value of your portfolio would be to deduct your allotted sell stop percentage. For example, if you use my recommended trailing sell stop of 7%, then your $100k portfolio would be worth, in the worst case, only $93k.

You may not like looking at it that way, but it is realistic when the market stalls or retreats. It will help you to always focus on the “real” value instead of on a number that is not only subject to change daily but also totally out of your control.

If you can incorporate these 3 things into your day-to-day investing life, you will be able to keep your emotions at bay which, knowing that you have a plan to deal with uncertainties, will allow you to sleep better at night.

And if that doesn’t work, go ahead and visit the nearest “mixologist.”

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

The bears managed to pull the major indexes off their highs and handed the bulls a solid defeat. The markets had their worst week in 4 years.

Our Trend Tracking Index (TTI) for domestic funds/ETFs still remains +1.77% above its long-term trend line (red) as the chart below shows:

The international index has now moved to +2.58% above its own trend line, as you can see below:

For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.