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MARKET CALL: Sit Tight, Wait For Correction To Materialize

5 October 2009 No Comment

The broad market has corrected from its highs a few weeks ago.  Whether or not this correction continues lower or bounces up from its levels remains to be seen.  Either way, I’m sitting tight.  I believe that most stocks are overvalued and pricing in too robust of a recovery.

S&P year to date

The Market

As you can see in the above chart, you can see that the market moved lower from its highs and now sits right at its 50 day moving average.  While many traders look to play the gaps and the technical lines (see Mark over at Fund My Mutual Fund how he played the move from 1040 to 1020), this isn’t really the moves I make.  If you label that short term trading, I guess I’m more of medium term trading; extending this further, I guess long term trading would then be defined as ignoring the market moves up and down.

Playing the technical support levels, gaps, etc. is definitely a style of trading that has merit.  I pay attention to these levels but don’t make many moves based upon them.  Maybe I should begin to consider.  If you place value on this methodology, then the S&P needs to crack the 1020 level, then it should move lower.

Stocks – Staying Patient

Stocks are not very attractive to me right now.  There are some companies that I want to own, but I’m looking to get into these stocks at much lower entry points.  If a major pullback materializes, I will pull the trigger on some stocks.  I will detail these as they begin to materialize.

Gold – Buying On Dips

If a correction happens, gold will likely pull back as well.  I’m looking to continue buying gold on dips including gold mining stocks.  The long term inflation story is what I’m looking to play.  If I miss my entry point by $50 or $100 or so, I don’t think it will impact the long term play too much; therefore, I’m buying on dips but not worrying too much about getting the “perfect” price.

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