This market is totally schizophrenic. It is also driving many traders mad, as well as broke. Let's see what happened this week.

As you see, no trend lasts too long in this market. One day they love the Cyclicals and hate the High Tech's, and the next day they love the High Tech's but think the Cyclicals have gone too high too fast. These near daily turnarounds in sentiment make the market very hard to "play". So the answer is very clear - don't "play" it. In these volatile markets, it's more important than ever to do your homework. Make your investments with a 3-5 year time frame in mind, and you will do alright. Then don't pay too much attention to these short-term fluctuations, because they will drive you mad too.

Finally, the choppiness of recent days reminds us of the importance of a diversified portfolio. If these markets make you nervous regardless of your diversification, than sell stocks until you reach your comfort level. There's nothing wrong with cash or bonds, especially if they help you sleep nights. Remember, if you have a love-hate relationship with any of your stocks, sell half and keep half. In the meantime, avoid momentum stocks and high P.E. stocks, some of which have had some bad days lately. There is still plenty of gas in these beauties, and when that party is finally over, it ain't going to be pretty. Stay tuned.

The Market Pro - April 30, 1999