Heres a chart of the 2004 bear market/correction just to illustrate what COULD happen. Im not saying things have to play out this way..Im using it to show that just because we have a strong pullback up to the break doesnt mean its going to continue. Look at those daily bars... LOTS of strength there. So what happened? I see a lot of similarities here... of course I see shapes in the clouds as well
I'm with you. I was a very vocal bear. Peruse my posts. Rode the downdraft May '06 and Feb '07. But I'm now riding the wave higher selectively with conservative strategies. I'm also at 80% interest-bearing instruments. If I see a dunk I'll go in short term and pick -up a one percent return without risking my whole nut. Blah, blah , blah
I was looking at the exact same chart too. I'm still long-term bullish but I would like to see the market go down to 65W MA to be 100% long. The recent high in bonds was in the last week of February, so I'm expecting the market to start its decline soon. High yield bonds broke their up-trend too. So many factors coming together for bears. If I'm wrong, I'll know by Monday's close and will take a loss.
I expected a weak pullback, and this was about as good as it gets. This is the last week of March and of the quarter, and I would expect some additional buying in the next few days. I would not be surprised if the June E-mini hit 1465 in the next week or so.
I have decided to take precationary measures by buying puts for some of the stocks I own to factor in a possible repeat of Feb 27th. The problem is the Asian markets could fall again and cashing out on puts can help minimize paper losses. If the asian markets fall 4-8 percent in one session that would euqaal a 2-4% loss in the US indexes and a 4-8% loss for the stocks I own. Therefore, I buy puts at the approriate level.
What I find disturbing is that put option contracts are so much more expensive than they were just back in January. Running a straddle or strangle is so much more expensive now.