Software & Finance

Stock Market Correction is Imminent

Sep 19, 2010,  CBOE - Volatility Index (VIX) closed at 22.81 and S&P 500 index 1125.59 on Friday Sep 17, 2010. This low level of fear gauge giving as a sell signal and to go long on bear ETFs. 

From Aug 26, 2010, Dow Jones was up on 12 sessions out of 15 sessions. NYSE Volume is still at low levels about 30% below so far in the month of september. For example, if we take Bank of America (NYSE:BAC), the 10 days average volume is at 132 million shares which is about 1.31% of total shares issued. It shows that that only less than 2% of shares in the trading activity which may most likely to come from speculators rather than investors.

Once the panic begins, it will push all the retails investors and hedge funds to liquidate their position. Today stocks are vulnerable to hold. How much percentage we can go up from this level, we will also likely go down with very sharp pullback and will not even find time to exit.

Next FOMC meeting is scheduled on Sep 21, 2010. I expect the market to be very volatile and the volume also likely to surge in the coming weeks at least until mid-term election to be held in USA.

Market is giving reliable sell signal indication. It is a good time to begin shorting the market. Mid-term election in USA on Nov 2, 2010 and 2nd next FOMC meeting on Nov 3, 2010, gives more information about the market direction.

For conservative investors, it is a good time to exit the market and wait until the end of this year to get the correction completed. Surging VIX and collapsing TLT will give reliable to signal to BUY. I expect this to happen couple of weeks after the election.

Direxion Daily Financial Bear 3X ETF (FAZ) closed at 13.12 on Friday Sep 17, 2010. FAZ is good to buy at these levels. Even FAZ is good to buy at these levels, it is important to note that it is a leveraged ETFs. Leveraged ETFs may not be suitable for all kinds of investors as it posses high risk if the market direction is not favorable to you. Also refer to my earlier articles on leveraged ETFs. ProShares UltraShort QQQ (QID) closed at 15.37 is also a good buy at this level.

FAZ is a buy again - Sep 03, 2010

Option Price Calculator - Posted on June 05, 2010

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 Posted on Sep 19, 2010