Keep Your Short Selling Options Open, Says Dr. Joe Duarte
Duarte added: Wednesday's stock market volatility is a signal that the worst may not yet be over for the stock market. Look at the reasons behind it: bad news and gaffes. Treasury Secretary Timothy Geithner, for a brief moment, gave traders the impression that he was willing to consider giving up the dollar's role as the world's reserve currency. Then later in the day stocks gave back all of their gains on a bad bond acution. Those are not signs that the all clear has sounded.
So why are we writing about selling stocks short? Well, because, the reality is that we're not sure if this bear market is over, which means that we have to consider the fact that this rally could fail and that short selling may again become a valid strategy. Short selling funds rise in price when the market falls and can be used for protection of a portfolio or to attempt to make money when the market goes down. An excellent review of how anyone can make money via exchange traded funds that sell the market short can be found in Market Timing For Dummies, by yours truly. See below for a link to the book.
When do we start worrying? Well for one thing if the S&P breaks below 800 and selling picks up steam, things could get worse in a hurry. The 750-780 support band is important, as a break below that could lead to yet another round of selling.
And if there is some nasty surprise that is unveiled, well, then it's coitains for the rally.
Which brings us back to our short selling ETF, SH. SH has support at 70-75. If it holds somewhere in that band, as the market starts to fall, it would confirm the fact that the market is starting to weaken.
Duarte's conclusion: Keep your eyes open and be ready for anything because this is still a crazy market.
Make Sense of today's Nonsense. Get Doctor Joe Duarte's Market I.Q., at:
http://www.joe-duarte.com/free/order_choices.asp and subscribe to www.joe-duarte.com, for its daily energy review and stock picks.
A book for this market - The All NEW Market Timing For Dummies. at:
Duarte partners with the Investors Resource Center at Investrend Information (http://www.investrendinformation.com).
Duarte's IntelligentForecasts.com (http://www.intelligentforecasts.com) provides free news coverage and analysis, and his daily articles and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Duarte has combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.
He is the author of: Futures And Options For Dummies, Successful Energy Sector Investing, Successful Biotech Investing and co-author of After-Hours Trading Made Easy. In early 2001, in Successful Energy Sector Investing, he correctly predicted that Venezuela's political problems could lead to an energy crisis in the United States. He has also appeared as a weekly guest on Market Mavens Radio and has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.
One of CNBC's original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990. His articles and commentary have been featured on CBS Marketwatch, Barron's, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines. In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.
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