Mailbag

My mailbag is flooded at the moment, but I hope my answers to at least these questions will be helpful.

Topics I covered in this week's mailbag include the following: the Fed's good intentions, my opinion on share buybacks, how you develop trading skill, risk management software, confusing brokerage statements, taking daily breaks, three qualities of successful traders, searching for the bottom in homebuilders, buying long-term in extreme oversold markets, how to create a watchlist, and why good stocks are underperforming.

Q:  Do you think you made a mistake by not turning bullish last week?

A:  I don't know yet. The market hasn't proven, at least in my own opinion, that the lows have been put in when evaluating the technicals, fundamentals, valuation, and sentiment. As you know, we briefly managed to move into oversold territory in January and we would have reached extreme panic levels if the Fed hadn't cut rates so aggressively these past couple of weeks.

No matter what your opinion is of the Federal Reserve, the powerful are doing their best to manage and move the market in a manner that we've never seen before. I think ultimately this strategy will backfire but probably not in way many expect. By preventing the market from going down naturally, I think they also limit the upside potential for U.S. equities. As an investor (and trader), panics and major selloffs create a lot more opportunities for us. Ironically, the Fed is preventing those opportunities from happening. As one of my favorite law professors loved to say, the road to hell is paved with good intentions. I think the Fed's intentions are good, but the end result may offer a far more challenging market than we've ever seen. Volatility is great for daytraders, but for those of us looking for 10 baggers and more, I suspect the market we're likely to see in both the medium and long term will be far less rewarding.

For other questions and answers, please visit the members' only website.