Use These Rules to Survive a "Meat Grinder" Market

Welcome to the meat grinder, bud.

The market took a ton of traders and ground them into hamburger meat last week…

The Dow dropped 280 points Friday. The S&P spit back more than 1%. Both China and Greece took it in the backside. But hey, don’t worry…

Today you’re gonna learn exactly how to stay away from the meat grinder. You’ll learn three specific strategies that will not only let you survive the carnage – but actually make you money. They’ll allow you to eat steak, instead of becoming one. Let’s dive in…

Even with last week’s losing action the market isn’t down for the year. But it’s not up significantly, either…

Both the bulls and the bears have got the market wrong this year. It’s gone nowhere. The S&P 500 is up a glacial 1%. The Dow is as flat as your average runway model. The Nasdaq is up about 4%, thanks to the market’s few bright spots – roaring tech and biotech rallies.

See that chart? That’s the sideways market that frustrates the bejesus out of traders. A sideways market gives little action on the upside or the downside.

But listen, take a deep breath. This sideways chop won’t last forever. And you won’t be stuck with chintzy gains for long. See, there are ways to trade around the chop. Heck, we’ve been doing it all year!

And it’s all because we follow a strategy…

So here’s your 3-minute market survival guide. This is how you win when the market tries to drag you into the meat grinder:

  1. Slow Down

I say traders have two options in this market: speed up…or slow down. And since I hope you have a life outside of watching a computer monitor between 9:30 and 4, I suggest you put your daytrading dreams on hold for a bit and hit the brakes.

It might take a little longer for your trades to play out when the meat grinder’s churning. But that’s OK. If we catch the right stocks and obey our trading rules we’ll avoid the carnage.

We’ll score gains without risking being ground into bits. Which brings us to our next rule…

  1. Trade Smaller

In a meat grinder market don’t go “all-in” on every trade. Trade on the light side when the going gets choppy.

There’s nothing wrong with buying a position half your normal size. It’s prudent. And it’s especially helpful if you find you’re getting stopped out of more trades than normal. Remember: we’d rather gain a little than lose a lot.

  1. Rely on Relative Strength

Here’s the question you need to be asking yourself every morning—before you even take one slurp of your morning joe:

What sectors or industries are outperforming the averages?

I know it’s cliché but a choppy market is usually described as a “stock picker’s market”. If you find the choice picks that are avoiding the meat grinder you can defeat the chop.

Look, we’ve had a very successful year so far. And it’s not luck or black magic… we’re just riding the strongest horses leading the market.

Not sure what stocks to trade? Just look at sector performance relative to the S&P. Energy and consumer stocks are beating the averages right now. Hint: those could be our hunting grounds in the near-term. There – with just that simple bit of information you’ve narrowed down your search by thousands of stocks

This week I’ll expand on our relative strength theme. And I’ll be tossing some juicy new trades your way.

Don’t worry—you’ll be eating steak again before you know it…


Greg Guenthner
for The Daily Reckoning

P.S. Would you rather eat steak or become one? If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakening e-letter, for FREE, right here. Stop missing out. Click here now to sign up for FREE.

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