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  • Get your investing thesis correct

    Posted by Frugal on June 1st, 2012

    Today market sells off big time (again), and it’s no surprise.

    I don’t understand why some pundits calling to get into energy and precious metal shares simultaneously. On an intermediate term basis, the two sectors would be out-of-sync more often than not. If you are bullish on energy sector, then you are bullish on the economy. If you are bullish on the precious metal shares, then you are bearish on the economy. On a longer term basis, one can be bullish on both, if one is bearish on the US dollar.

    I have not been touching much of the energy sector shares, precisely because I have been bearish on the economy on the longer term horizon. It’s interesting to observe how these two sectors going out of phase with each other. In this environment, I believe that precious metal (PM) sector serves as a leading indicator on the way up. It gives you an early hint on QE3.

    The previous market cycle seems to have completed. We will have a new up cycle, with today’s hints from PM sector. Now the only question is how low will this market go. But I sure don’t want to catch a falling knife here.

    If you ask me, my best guess is that market may short-term bottom here with a climatic sell-off. It would rally back towards moving average. However, starting in mid-August for many about two months, it’s best to stay on the sideline. Euro crisis is simply not going away. Remember sub-prime contagion? The finale may not come for another two years (2014), and in the meanwhile, markets will go yo-yo before things get resolved if at all.

    More related posts:
  • Energy Sector Rotation: Buy Nuclear
  • Stock bulls are ready to go higher?

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