Will lightning strike thrice?

The FOMC will meet Sept 17-18, US Time. Bernanke will hold a press conference most likely Thursday morning, our time. We'll have two days of trading left in the week after his announcements.

At this time though, it's definite that the US government's printing of money will taper off. The remaining question is only: by how much?

Foreign funds continued to exit out silently--from SMC, some banks, other conglomerates the past 2 weeks. They only bought significantly Wednesday and Thursday and then became net sellers again on Friday at small 50 M. (They could have been net buyers if not for the MWSS's surprise ruling). These funds' moves should have reflected already what they believe as appropriate steps side-by-side with the amount of tapering that they are predicting.

There are also speculations that foreign funds have withdrawn from our market enough, they cant wreak havoc with same amount that they've done on two occasions in June and August.

Bernanke and his team also is now very aware on the debilitating impact of their every words and hint the deliver regarding quantitative easing. They should want the least jolting in world markets. There is also no real pressure to cut QE big in one shot. The Fed should start minimally tapering in single-digit %.

All these are optimistic scenarios. What if lighting did strike thrice? What if our PSE is really that small that even at the slightest tapering, the equivalent funds that would be better off back in the US markets will wreak -8 to -10% downtrend in a single day? What if the foreingerz's shock and awe extends to Friday, even?

The best solution will be according to the rules that you will set. The most common can be:

1) Set your cut loss percent ahead. Think about that one number hard. Those that cut last time at -10% was frustrated to see the price recover (pushed by locals) in 2 days. While in June those that chose to bear -10% saw prices tumble down -15% or more. Set a % where you'll be comfortable with even if whipsawed

2) Have a strong cash position that you can use to average down on current holdings. This is assuming that your current port is a pool of fundamentally-solid company, and among those firms that showed at least +10% earnings growth this first half. If youre holding GREEN, PHES, LC, JOH, and bazurs cut-loss is the only solution. If youre holding AEV, AC, TEL, JFC, AGI, et al I suggest you average down starting at -8% from its price on Wednesday. My recommended cash position is 30% cash as budget (war chest) for this averaging down. Why not sell more holdings beginning tomorrow to prepare for Thursday? I think there's a chance our market will be positive next week (overall). We're fresh out of Ghost month, and historically our market gains are respectable on these dates. There's even that chance of a Moody's upgrade. You wont have a chance to gain substantially from this [also possible] uptrend if youre out of the market or have too much cash at 60% or 80%.