Some of our subscribers jumped into Yellow Brick Road stocks last Friday and they are now suffering losses. This should have never happened. Here's why:

When we said on January 8th that, "Prudent Investors should consider buying top ranked stocks from the "Easy Does It - C/Up strategy," we did not intend for investors to buy these stocks under any circumstances. The word consider means to think about carefully, to ponder. The market had gone down sharply the day before we got the C/Up signal and the rally was weak on the day we got the signal. This is what caused us to be tepid in our guidance. Even so, there were other warning signs which should have been heeded.

Never buy into a down market. We have demonstrated this point over and over again in managing the Model Portfolio. The Futures were down going into last Friday's open and the December Jobs Report, which was not as bad as ADP had forecasted, did little to encourage the bulls. The market opened flat to down and by 10:30 AM, it was clear that it wasn't going to be a good day for stock prices. In fact, we closed out of our last position in the Model Portfolio instead of replenishing vacant spots had the rally continued.

Use limit orders. Even if the market had been going up, it would not have been a good idea to buy the YBR stocks at the open. All of these stocks opened sharply higher on Friday, January 9, 2009. Clearly we had moved the market and this is exactly why we usually suggest at least five different searches when planning an entry in the Model Portfolio. I wrote about this issue as recently as October 24, 2008 in my essay entitled, Make Money for a Lifetime. OK, so what could I have done better?

Elaborate. Brevity may be the soul of wit, but our job is not to be witty but to be clear and explicit. Henceforth, I will try to communicate my thoughts more completely. Simply saying "consider" instead of "buy only if the market is moving higher" did not provide adequate guidance. Everyone should know that we are trend followers and that we plan to trade in accordance with the trend. Therefore, we will not make a trade if the market is moving counter to the perceived trend. While we advocate buying rising stocks in rising markets, both the stock and the market must be rising when we make the trade.

Do not make predictions. The worst thing an investor can do is let predictions influence their objectivity. For example, I expected the market to rally into the Obama inauguration and I know I shouldn't have done that. Predictions cloud one's objectivity and I found myself cheering for the rally instead of responding to its recent weakness unemotionally. That's too bad because cheerleaders don't make money. I know that, so it's a Lesson Re-Learned.