By nearly every measure, August was ugly.

The S&P 500 fell 4.7%, the Nasdaq dropped 6.2% and risky assetsthink iShares S&P SmallCap 600 Growth (-7.16%)) and Germany (like iShares MSCI Germany Index (-6.89%)) were hurt.

Safe-haven assets such as the yen, bonds and gold finished August higher.

We often make the point that trading is about making the most informed decisions relative to the markets and our own portfolio. I m not dumping those positions which have rallied, like the yen, but I m cognizant of which sectors outperformed, such as utilities (+1.45%) and telecom (-1.52%), and which didn t, such as financials (Financial Select Sector SPDR -7.68%). Benchmark names like Bank of America, Wells Fargo and Bank of New York at 12-month lows are a reason to avoid the sector, not seek it out.

For now, the market continues to favor dividend-oriented payers, which leads me to expand exposure in telecom names like NTT DoCoMo, which have continued to notch new highs along with other telecoms like Windstream, Telefonica and AT&T. That s what matters, not opinions about the president, the stimulus or the potential for a double-dip. The market must always be your arbiter and guide.

S&P 500 vs. Vanguard Telecommunication Services (VOX), iShares Dow Jones US Telecom (IYZ), iShares S&P Global Telecommunications (IXP) 2 month

Ringing Up Outperformance

August's decline was accompanied by another jump in bearishness, to 37.7% the highest reading since March 2009, according Investors Intelligence, a research firm. Volume on the NYSE slowed to an 11-year trough, with many investors reportedly nervous about September (historically the worst month of the year for stocks), an attitude which failed them miserably last year as stocks jumped 4%. That negativity is bullish for risk.

In the classic "Reminiscences of a Stock Operator," Jesse Livermore famously recalls how, when holding a losing cotton trade and a winning wheat trade, he did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out, he explains. Of all the speculative blunders there are few greater than trying to average a losing game. Learn from his mistake. Cut the losers, and let the winners run.

To that end, I m passing on bottom fishing in the banks and instead continuing to dial for dollars in those select ideas the market is telling me are working, right here and right now.