A good way to profit in the correction

August 24, 20128 Comments

So, here we have it. It does appear that the beginning of the stock market correction (that I began calling for last week) may have arrived. I continue to believe that we will see the S&P hit levels of around 1360 – 1300 before the end of October. I’m sure there will be lots of up/down gyration to enhance the fun in between. The TSX may display high comparative strength vs. U.S. markets due to the gold and energy weightings in that index. But, it will nevertheless likely experience some pain over the coming weeks. I covered this on BNN on Thursday morning.

While I continue to hold cash, gold, energy and low-beta stocks as suggested last week, I’d also like you to see the chart of the TLT (iShares US long treasury). In a flight to safety, money may rotate out of stocks and back into bonds. The chart shows a classic bounce off of support (old resistance). TLT should be bought as close to the low-$120’s as possible. Resistance comes in at $130. I am not in this position right now, but may initiate a position shortly for my model equity portfolio run on behalf of my clients.

Notice

No blog will be posted next week due to holidays, but I will start September off with a new initiative for this blogspace. I plan to write 2 blogs a week starting in September, vs. the current weekly entry. I will likely focus one entry on the macro picture (broad NA markets), and one on sectors. I’d encourage you to post comments with sectors that you’d like covered – I’m trying to keep to interesting looking charts, so if something stands out, I will cover it. Further, I will continue to post on the broader trades I am examining or have entered for the models I run. As always, I continue to look for your feedback and comments on my analysis. Back in a week!

8 Comments

    • Steve–I hold a position in iShares Gold Bullion ETF (CGL-T)–there are many, many ways to play it–go to my website at http://www.valuetrend.ca and look at the Investors Digest/moneyletter articles. One of them I wrote listed all the bullion ETF’s (MNT-T, IAU-US, GLD-US come to mind). I went CGL for currency hedging, but it isnt necessarily the only one to examine if buying gold.

      Reply
  • Keith,

    due to the coming market correction and volatility, is it worth playing the VXX to maximize a profit?

    Reply
    • John–I have played the VIX before via the ETF’s available on it. Keep in mind that your timing must be pretty good–its a very leveraged way to play volatility.

      Reply
  • Keith,
    In an upcoming post I hope you can compare and analyze the pros & cons of choosing a US regional banks ETF vs our Canadian banks (eg. KRE vs ZEB). Many thx

    Reply
  • Hi Keith,

    I was looking for a similar etf that trades on the tsx. One of my accounts really ding me on US exchange fees.

    I was looking at the BMO long bond to hedge my risk ZFL. Is this similar to TLT. Would you use this to hedge risk or just instead of holding cash to play the downside.

    Thanks for the Help.

    Reply
    • ZFL is fairly close in profile, but the swings are more moderate. The BMO ETF holds a 10 yr to 25 year mixture, whereas the TLT is more of a “pure” play on the 20+ term bonds.

      Reply

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