Devoted to understanding the basics and fundamentals of investing

How's that for some volatility in the stock market? The Dow Jones Industrial Average closed today down 281 points, the NASDAQ lost 65, and the S&P 500 39 points. Bear Stearns came out making some very bearish (no pun intended) comments on the fixed-income market being the worst it has been in 22 years. Apparently this was all traders needed to sell. 

I am in the camp who feels that this news contributed, but was certainly not the sole reason for this large selloff. In markets that are uncertain, Friday's are generally a very tough day as traders don't want to hold stocks through the weekend. The stock market has had a great Bull market run for the past several years with no correction, and a correction is probably due. The advance to decline ratio on the NYSE today was 543 advancing issues and 2,740 declining issues, typical of a strong volume negative day like today. Up volume accounted for only 6% of the total volume on the NYSE today. There were not many places to hide today.

What should you, the individual investor, do in this market? The simple answer is you truly should do nothing. This is not the kind of market for individuals to be trying to pick a bottom in. Investors must remember not to panic in this kind of market, panic will never make you a dime, but it can lose you a lot of money. I think the most prudent action we can all take right now is to have a decent amount of cash on the sideline ready to be put to work when the time comes, though that may be a while. It is quite likely we will see more days like today, with heavy volume on the downside and nowhere to hide.

There will be quality stocks beaten down to levels that are insanely cheap, and we will certainly have a chance to buy some and let them ride. Now is not the time to try to stick your foot in the water though. Let the market get through this period and be ready to go to work after it comes in.