Be bullish!

August 2, 20113 Comments

World MoneyShow Toronto & Vancouver

Be sure to catch my presentation on “How to Profit in Volatile Markets” at the MoneyShow in Toronto on Saturday September 10th at 9:30 am or in Vancouver on Tuesday September 20th at 9:30 am.

I’m just sayin’…

For over 3 months now, I have made it abundantly clear on my blogs, my BNN appearances, and my Investors Digest / Moneyletter writings that I felt the market would be stuck in a consolidation pattern for most of the summer. My upside projection for the S&P 500 back in April was for a ceiling at or just under 1400, and a floor at or near 1250. That is precisely what the market has done. The S&P 500 has moved see-saw between the mid 1200’s to the mid 1300’s since my  prognosis in April.

As we enter into the mid part of the summer, I note yet again that the S&P has failed to crack its ceiling, and is declining right on schedule. It is my considered opinion that if/as/when the S&P 500 reaches or nears 1250 (draw that line with a thick crayon–it could go + or – 10 points from that level) it will be a buying opportunity. Click on the chart below to see how utterly contained this market has been over the period in question.

An options strategist told me a few months ago that there are an awful lot of option “put” contracts maturing in the late fall of this year. For that reason, he felt that the market would NOT experience a sell off in the fall.

Why does he feel this way? Put contracts are a contrarian sentiment indicator. Too many bears buying puts are, ironically, good for the market given that these folks have historically been wrong most of the time!  This negative sentiment might shift the seasonal buying opportunity that normally occurs in early November ahead of schedule. Thus, the current correction on the S&P 500 may present a buying opportunity if it reaches my 1250-ish target. For what its worth, I think its going to hit that very, very soon given the current downside momentum.

I have been holding lots of cash, as readers of this blog & columns, and watchers of my BNN appearances know. This move has served my clients and readers well, as we are now in a position to take advantage of  the sell off. This beats the buy-and-hold crowd’s tendency to be victimized by market downturns by a long shot! I am already starting to deploy some of it. I’ll provide a few thoughts on my favorite sectors next week, but its my opinion that anyone buying into the current sell off may be nicely rewarded over the winter.

3 Comments

  • Hi Keith
    Your ability to predict the market continues to impress your loyal readers. Looking forward to your new book.

    Does this level of correction surprise you or does it still fall within the amount you predicted.

    I also curious about your take on precious metals. Last week, Eric Sprott was quoted as saying this next down turn would initially take down gold shares and then they would see an secular up turn to the general market ….in his words ‘it may take a week or a month’ but gold shares are undervalued and the best companies (Goldcorp etc) will begin to shine.

    thanks for your ongoing thoughtful ability to summarize the big picture…

    Reply

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