First Fall Is Not As Ugly Yet
With Monday drop in the stock markets, sentiments have temporarily turned. I think before the first week of July, stocks may be still in the “levitation” stage, meaning that a big drop won’t come yet. Plus that today and tomorrow, Fed will come out and swing again. We are sure to see some more volatility. Unfortunately, the only thing htat I’m more certain is that it may be a short-term downside on gold. Fed is losing its credibility. Whatever Ben says may backfire now, posing risks to further bond yield rise, or US dollar fall. If US dollar falls (which is less likely in the short term), then we can party on.
I have previously stated on my blog that I believed a decline will come by July/August timeframe (please post the link if you find it sometime back in April/May. I’m really too busy to blog these days). Currently, I’m still not sure if the current decline will turn out to be the retest of the low. It is still possible for stock markets to decline moderately towards late July, and rally back up in August to establish a lower high on the chart. In any case, it seems to be fairly certain that the high of 2009 AND 2010 AND 2011 is behind us. There may be a very brief year-end rally in December timeframe, but I seriously doubt that brief rally can exceed the last high. And the financial crisis will probably replay with a even bigger magnitude either second half of this year, or in 2010. In any case, I’m also certain that Bernanke won’t have his current job in 2011.
It is my opinion that one should divest everything correlated to the general economy and go to cash.
For the aggressive traders, they can look for establishing short positions.