Today is May 19, 2011. The market has been up and SPY is up by about 9% YTD. Both opposite camps on this correction have convincing arguments.
I have been selling stocks several weeks ago and move most Annuity positions to money market fund (Energy and Commodity sector funds to Health Care before the crash). My total cash is 25% and am still selling. I sold most stocks at 5 to 10% higher than the market prices. Hence, even there is no correction I'm making a handy profit for the stocks I sold and it is a good insurance policy when I see risk in the market.
Next week or when I have about 30% cash, I may play the 'buy one and sell two strategy' betting I can spot stocks better than others. I will sell the stocks I buy right away for a small profit.
* Arguments for no correction:
- QE3 will not be materialized (and gold, oil will not rise by a lot) due to the debt ceiling.
- Corporate profit is still rising.
- The economy is improving.
* Arguments for correction
- QE3 will not be materialized and no money to stimulate the economy and the stock market. Contradictory with above argument!
- The market is taking a breather.
- Slim chance for no 'stay away in May' for two consecutive years
- Global problems from China, EU, Japan, N. Africa.
- With tightening margin requirements, commodities, oil..., speculation buys will be reduced (good for the long term).
The above is a summary of what experts said. I do not do any research (as they're already available from the web), but summarize their opinions, select what make sense to me, and act accordingly.
I choose the middle road. Prepare for it as below but move stocks gradually to cash at higher prices. If I'm 90% sure, I will not move 90% of my stocks to cash as I may have 10% wrong.
Click here on how I prepare for this correction.
(c) TonyP4 2011. Written: 5/19/2011. Updated: 6/1/2011.
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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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This turns out to be quite correct. It is an educated guess and past performance does not guarantee future success.
ReplyDeleteI try not to change this blog. There are several grammatical errors. Do you want good English or a blog that could make you money?