First of all, my condolence to all the victims in the Paris terrorist attack yesterday. Let's all pray for them?
Here is what I warned my friends last Wed on Nov 11: "The market is poised for a big downside move in the near term. In the
past week, the tone for it has apparently changed, often opening high
but closing low, a quite bearish sign. Then the technical setup for VIX
suggests it may likely go up sharply towards 20. The lagging small caps
plus declining junk bonds only add more bearish indicators. Buying some
TZA or SDS is a good idea to trade the trend." Luckily the timing seems almost perfect as the market immediately started relentless decline for 2 days, pushing S&P into the negative territory again. So the obvious question is whether this bloodshed is over by now? Here is what I'm thinking for the next one and a half months for this year.
Currently the market is quite oversold and we are moving into the seasonal bullish time, the Thanksgiving. But due to the terrible Paris terrorist attack, early next week may be tough for the market and some further selloffs may be possible. However, I don't think it will last long and likely it will quickly recover and start a very short-term bounce back, given how oversold it is now. Having said that, it is premature to say that this round of correction is finally over. I think a new selloff may likely recur again towards the end of November. This may create some real panic moods, which could become the final blow to the market. This may push S&P below 2000, possibly even around 1950. After that, a year end rally may finally start into the new year.
Of course, it is all speculation at the moment and the market rarely follows exactly what people think. Just keep in mind, there is still risk if you want to buy stocks now for longer term, unless you are a nimble trader.
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