There is too much complacence in the market and I have a strong feeling that there is a severe correction looming soon. While it makes people feel good with everyday increases of stock prices, you could be a big sucker when the headwind suddenly changes its direction. Don't be lured into this trap. Personally I'm basically doing nothing in the past few weeks except I took some short positions to bet for a market decline.
As I said a few days ago, I think oil is due for a significant drop now. But the best time for shorting it is not now. Why? From the technical perspective, the general pattern is that you will see a quick drop first, then it will try to bounce back to test its previous high because there are always people out there trying to catch the bottom. That is actually the best time to short for a relatively longer term. Having said that, if you are a very nimble trader and can move very quickly, you may still put in some short positions against the oil but you need to get out very swiftly to cash out your profit as soon as it starts its first leg drop. Otherwise your profit may be wiped out when it bounces back. For shorting oil, you may buy the September put options of UCO, which has 2 x leverage to amplify your profit if indeed oil starts to decline. Of course, it is highly speculative and don't bet with your money which you cannot lose.
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