Today we had a huge rally in the markets, and it seems like the Dollar made up for its friday performance.
The bulls have officially taken the reins... let them! Its funny how this always happens, the market works in extremes. First everyone gets scared and people panic (the market gets oversold). Then a natural rally occurs, and some how people become overly bullish (the market becomes over bought).
If you havent already passed off your shares to a speculative bull, I advise you do so.
This market, though very impressive, is getting to the tipping point. Sure we've beat alot of horrible earnings forcasts, but we're seeing minimal consumer spending, excessive unemployment and an ever-looming threat of continued credit carnage spurred by toxic mortgages. The financial sector is about to recieve another aggressive kick in the groin when these option arm's, ALT-A's, and commercial loans begin to default.
So where should you be positioning yourself to benefit from the disaster?
Chances are that when the bears regain control of the markets the dollar will see a decent rally as investors look for a safe haven. That means that commodities will most likely take a hit. I don't think that its necessary to sell off your commodity positions as long as you have some extra funds to average down, but I would recommend holding any purchases until you see a decent pull back. Some other positions that I see as profitable are shorts, especially in the real estate and financial sectors. There are ETF's that are set up to take advantage of bearish moves in different markets. So take any profits on equities pretty quick here and keep your cash ready for attractive prices in gold, oil, silver, and also short positions on financials and real estate.
SEF - Short Dow Jones Financials
SKF - UltraShort Dow Jones Financials (2x leveraged ETF)
SRS - UltraShort Dow Jones Real Estate (2x leveraged ETF)
