Looking at the market and planning

Posted by admin on March 11, 2009

I stated last week that I thought we were close to making a short term low in the market.  We were extremely oversold and were due for a correction.  After two up days in the market there is still room to run before we run into the 50 day moving average which is sitting at around 817 and the last floor we went through was at 800 which also becomes resistance.

The 50 day MA will continue to come down, but I believe the S&P 500 price will converge with the 50day MA and resistance level at around 800.  That will be about a 20% increase off of the bottom.  My initial reaction is to say that the broad market will pause or fall at that point, but you need to begin planning on what you want to do.  Use this opportunity to sell some stock and raise your level of cash or move into corporate bonds.

If you have read any of my past posts on technical analysis you know that I do not think you should be invested in stocks right now since the market is in a down trend.  You need to wait for the 50 day moving average to cross above the 200 day moving average for the trend to move up before putting new money in equities.  In the meantime use the rallies to either sell or if you would rather hold your long positions and wish to hedge them buy some of the SDS ETF to hedge some of your longs.  By the way here is a good list of short ETF’s.

40 Great Inverse / Short ETFs For Bearish Investors

 GOLD

 On another note I still believe Gold or Silver should be bought not as much for an investment, but as an inflation hedge for the future given all the stimulus packages being rolled out by the world governments are trying to reflate the economy.  With the huge supply of currency being put out into the world then we should see inflation in the future. 

 Please read the disclaimer.  I am not a licensed financial adviser, please consult your advisor prior to any securities purchase as there is an inherent risk in investing.  Develop a plan and be careful with your money.

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