Double Dip or Simple Fear ?
Investors and traders are a crazy bunch and they often do things which boggle the mind and the recent market turmoil is proof of that. Even yours truly issued a clear statement that he was going to be sitting on the sidelines for bit, since there was simply no way to trust the systems to cope with the extreme reactions displayed.
As an example… If the US had decided refused to raise the debt ceiling and chosen to default … the market could have appluaded the decision as the right one , and actually turned around and gone up.
Alternatively , all the pricing models which factor in the treasuries as the de-facto risk premia would have been effectively dealth a death blow… Markets could have tanked due to sheer panic by the institutions… Prior to the decision it was a toss up which way markets would go…
Post the decision, traders now had to deal with what the rating agencies will do … And the recent conflicting decisions by Moodys and the S&P rating agencies, have still not created the clarity of thought, traders love to have for seasoned decsion making
As I promised in the previous post, I will give more clarification on what to do next
The Market now seems to have spoken…Loud and Clear ….Listen UP ! We are in a BEAR market… for how long we dont know yet , but we are in a BEAR market now…please make no mistake of it.
With the S&P breaking below its 50 and 200 day moving averages, My advise to those who care to listen is to now look to go Short. Select short positions from stocks or sectors which were displaying a topping pattern and go short. Look closely at the chart above… See that Big Volume Spike…. its in the Billions… We need to see that Volume evenloy distributed and coming back into the markt before you even think of buying Stocks.(Read the Caveat Below).
CAVAET:
Sure many talking heads will come out now and talk of how things are really cheap and this is the time to get great deals… I agree. If you are able to do/have the following
- A team of research analysts who do a proper company valuation for you.
- Who can guarantee the books are not cooked. i.e We can actually trust the data produced in the financila statements… We dont want another Enron
- Stocks which are still shwoing strength in the Bear Market. i.e Stocks which are showing divergent behaviour from the general markets.
Failing these three conditions above, please stay safe … by playing on the short side.
Finally, Congratulations to our all our OWL subscribers who pocketed recent gains of over 300% on our May 29th recommendation. There will be two recommendations issued in August due to the vast amount of profit opportunities currently present in the Options Arena.
Stay Empowered.
Ty
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