Investment ideas for the next correction...

B

Bullverine

Greetings all,

The market has been red hot past week. All the dips have been bought up, inflation ignored, S&P downgrade ignored, Europe ignored, $112 oil ignored, upcoming end of QE2 ignored. It is my opinion that this has partially to do with the earnings season and the fact that there is not to many alternatives to generate good returns and that the earnings have been mostly solid.

Now with May and end of earnings season approaching and the Fed decision approaching we might be due for another pull back/correction going into summer. I was wondering if it might be a good idea from investment perspective to trim down positions in certain companies/sectors and maybe even start small short positions in certain companies/sectors? What companies/sectors do you think would be most susceptible now?

I would love to hear your advise/opinions. Criticism is welcome too, just please don't mindlessly flame.
 
upcoming end of QE2 ignored.

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Because there is going to be QE 3 before end of next quarter and the "Market Parasites and DC know this, as do the banks et call.)

The Fed can't stop QE because they would have to raise rates (Like what is happening overseas). QE1 QE2 are the only reasons why the market is in Rally mode.

Buying dips is the trend. This market will not sell off. It IS MANIPULATED. PERIOD.

I would take what ever cash you have, give Everbank (where I hold all my Cash) and unload it into Money Markets with basket of Currencies. I would sit on this cash in those baskets and wait for the opportunity to look into Key Hard Assets. This may be a while.

But if you are able to hold all your US DOLLARS and covert them in to the Basket of Currencies, keeping your network from falling, then that is the smartest play yet.

The storm is just starting, 08 was nothing. We are in for a serious Financial Shock on the next leg down in the ECONOMY, but remember.... The markets are not going to follow the ECONOMY as the FEDS will Raise Debt Ceiling and QE 3 will be announced.

So, I guess if you support the idea of the US STOCK MARKET, which I no longer do, you can just keep buying the dips and cashing out in the rallies. Odds are you'll do ok if you do not get chopped up in the Light Volume.
 
Thank you for the reply.

I agree that the market is hooked on QE and is manipulated. QE3 is a possibility and a raise in interest rates is very likely in my opinion (given the pressure from China and the lead from Europe). I wonder if there will be a sell off or if we will be stuck in a range through the summer.
 
Quote from EMRGLOBAL:

Buying dips is the trend. This market will not sell off. It IS MANIPULATED. PERIOD.
More...

Agreed.

As a day trader, anything goes throughout the day, follow the intraday trend.

As a short term swing trader, anything goes, follow the immediate trend.

As a longer term swing trader or investor, you should welcome any selloff/correction as a key opportunity to initiate or add to long positions. There's a significant population of potentially market-moving participants eagerly consuming dips/selloffs because they missed several boats already (March 2009 lows, July 2009 dip, Feb 2010 dip, May-July 2010 dips). The dip consumption occurs at shallower levels as the bull matures. The former bear market move has retraced to a level where October 2007 highs are technically in play, as impossible as that may seem.

Why is that level technically in play?

Because in March 2010 price closed above the 200-day moving average, and remained above it for nearly 2 months. The highs during this breakout move were retested following the post flash-crash correction and the pullback off that double top was very shallow. The recent pullback during the Japan crisis didn't even test that previous double top resistance, and in fact didn't even pull back to the 50% retracement level of the Oct 2007 through March 2009 range.

Barring a major shift in sentiment or a black swan event, October 2007 highs are definitely in play for long term swing traders and investors.
 
Quote from NoDoji:

Agreed.

As a day trader, anything goes throughout the day, follow the intraday trend.

As a short term swing trader, anything goes, follow the immediate trend.

As a longer term swing trader or investor, you should welcome any selloff/correction as a key opportunity to initiate or add to long positions. There's a significant population of potentially market-moving participants eagerly consuming dips/selloffs because they missed several boats already (March 2009 lows, July 2009 dip, Feb 2010 dip, May-July 2010 dips). The dip consumption occurs at shallower levels as the bull matures. The former bear market move has retraced to a level where October 2007 highs are technically in play, as impossible as that may seem.

Why is that level technically in play?

Because in March 2010 price closed above the 200-day moving average, and remained above it for nearly 2 months. The highs during this breakout move were retested following the post flash-crash correction and the pullback off that double top was very shallow. The recent pullback during the Japan crisis didn't even test that previous double top resistance, and in fact didn't even pull back to the 50% retracement level of the Oct 2007 through March 2009 range.

Barring a major shift in sentiment or a black swan event, October 2007 highs are definitely in play for long term swing traders and investors.
More...


I mostly agree with you. For the past year every dip has been bought up, so that is the trend for now. As for the black swan events, I would classify Japan as such, but we all know how that worked out. I don't know if I would rely on pre crisis technicals at this point considering how much the political and economic landscape has changed. If the market will stop discounting every news and gets in the summer 2010 mindset, we will bounce through all the technicals on every consumer confidence or housing report or any news from Europe/Middle East. For short term swing trade I am wondering who will be hit the hardest during the next inevitable pullback. I doubt it will be Tech since its been punished so much.
 
Definitely bullish across the board.

Don't try to be a hero trying to beat the SP500 with major added risk just buy the indices and have sleep better at night while you beat the ridiculous bank rates that we currently have.

Crazy A
 
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