Sunday, January 6, 2008

Short the Market

The market took a beating on Friday, with the Nasdaq losing over 3% today. Just look at the S&P 500 over the last six months and you will notice something really disturbing.

S&P 500 chart

Take a look at where the market ended up on Friday. It ended up at around the same level as the previous market dip in late November which is the same as a dip we saw in August. In November, after the market bounced, people believed it would be a double bottom. When you see stocks that hit a double bottom and then continue up, you normally take this as a reversal and that the stock is on the way up. However, there is no such thing as a triple bottom. This should make you worry a lot about the direction of the market.

If the market breaks through this resistance area, it has a lot to fall. If that is the case, then it would be best to buy either the QID or SDS both of which will double for every point that the Nasdaq or S&P go down.

If not that, you need to go defensive into names like Altria or Johnson and Johnson.

1 comment:

  1. Have you heard about McCafes? Here's an article:
    What do you think about investing in McDonalds?