Investment/Sentiment Sep 08

STI crashes from 2600-2450 around 5 %. due to Lehman brothers collapse.... Now AIG is next....I see panic selling and blood on the streets...butDow is still very high at 11000 down 15% from 13000 YTD.

I have caution myself for buying shares, but somehow or rather I was seduced into buying...maybe overconfident

In a extreme bear market, PE 6 to PE 3 is a 50% loss..... so even PE 6 may not give you a sufficient margin.

Right now, every upday is followed by 2-3 days of crashing, so every upday is an opportunity to sell. People thinking of cashing into the upside have fallen flat.

Now, many people are anticipating the market to come down even further. When it does, people will think that they are lucky to have avoided the market.

When there is a mini rally, people will think that it is a bear rally.“It will fall further.”And usually, it really does fall further.

Again, it makes people feel that they are right not to buy.It will go up and down until a point where even the most bullish person turns bearish.“......this will repeat a few times till people believe..."Oh its another bear rally"......that is when the finally the bull will turn up.

Even me right now, my shorts have not been covering the longs.... Lately, my shorts were 40% and Longs 55%. And what I learnt,
1) don't trade shorting in a bear market. In a Bear market, sell and hold.
2) Consider the US market vs the Singapore Market. Eg, Lehman did not secure fundings over the weekend. US futures very negative, but STI not that negative yet....can cover US and short Singapore futures. As when US market open, STI may drop further.
Eg 2, US rally the previous day, and futures up the next day. It is better to cover and short the US futures.