The market is breaking down, which is something I have been expecting for months. I know I'm too early to call a correction but finally it has come. The market has broken several important technical supporting levels. I think next week or two will be ugly.
While overall I think I'm very bearish for the immediate future, which may last for a few weeks, the correction may create a great buying opportunity for a bullish trend for the rest of the year and even into next year. There is just too much free cash out there created by Bernanke. Sooner or later, it will be flooding the market to create a huge asset bubble. The momentum underneath is just too strong to be ignored. So be ready with a shopping list for good stocks you want to own and you will have a great opportunity to get them.
I'm especially interested in precious metal stocks. Mining stocks have been killed for too long time and there is just too much bearish sentiment for them. The valuation for them is unbelievable at the moment. Buying them now is similar to buying stocks in Mar 2009, valuation-wise. I think in one or two years, people will look back and kick themselves why they didn't buy a lot of mining stocks then. I'm especially interested in those blue chip mining stocks, the largest ones with good fundamentals and pay a great dividend yield, such as GG, AUY, NEM, RGLD, SLW etc. It is unbelievable that some of them are paying 2-3% dividends. More attractively some even tie their dividends to the gold or silver price, i.e. the higher gold and silver go, more dividends will be paid. If gold hits new high some time in the future, which is almost a certainty, we may see 6% or higher dividend yields. Of course I'm not predicting the absolute bottom here. Mining stocks are still very volatile, but I will start to slowly accumulate their shares, taking advantage of further dips. And reinvest their dividends for long long time!
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