What I have Learned

...From the Downtrend of August 2007-March 2009...

I learned that the peak of the number of new IPO'S emerging coincides with the peak of the overall market...

New positions tend to start failing. Breakouts no longer work and fizzle shortly after they occur.

The quality of the stocks breaking out begins to diminsh. In addition, laggards that never made moves begin making moves and attempting to make new highs (the doomsday stocks..LCRX and CYMI used to be a pair that showed up).

Traders become antsy and look for other alternatives in order to make a quick trade/buck (such as trying to start trading penny stocks and other stocks and markets that they never traded before (this indicator is more psychological in nature as it shows distressed state of mind and of the U.S. markets in general).

The general public and market is in disbelief. Everyone is still euphoric and thinks the markets can make a new high and will continue to head higher. The TV market pundits (i.e. Cramer) continue to show irrational exuberance (i.e. shouting, yelling, high pitch squealing and hands being thrown in the air). No one believed that the Housing Bubble, and Credit crisis was real until it kicked them in the a$$.

I learned that the market makes its biggest moves to the upside in downtrends/bear markets and its biggest moves to the downside in bull markets/uptrends...

I learned that you should never leave your entire life savings with so-called guru hedge fund managers, who are ex Nasdaq chiefs, with perfect returns for over X amount of years with ties to the SEC...

I learned that when everyone is ready to give up on the markets and jump in front a train, that signals the end of the bear market (take the gloom and despair of March 2009 for example).

I learned that by sitting out of the market when you are uncertain, you can avoid devastating losses and still make a decent return by waiting and watching for setups and sector breakouts, even in a full blown bear market (ex: The run up on the oil stocks and sector breakouts of PDO, MXC and others).

How do I know all this? Because I lived through it and traded through it. I cashed in on the financials by shorting them (sorry MS, GS, LEH, etc, nothing personal, just business as usual) and quickly went to work buying stocks again once the market bottomed in March/April 2009. I learned that you should always listen to your hunches, intuition and experience. Learn from your mistakes. Jot them down and remember them, because the market doesn't allow you to repeat them that often.