Suckers Rally

In my posting of may 1st I said that the S&P at 1400 had no place to go but down. I also urged my readers to "be careful out there and protect themselves against the down side".SP index at 1400

Generally Canadians are nice and polite, so I did not dub the market's upward movement "a suckers rally". If you shared my opinion and protected yourself against a slide in the market then, I hear your laughter. If you didn't well, you got suckered.

Following the market decline in March many of the analysts called the end of troubles. Investors became euphoric and went on a buying binge driving the S&P upward by 11.8% in just two months.

Today the S&P touched an intraday low of 1252. This not only wipes all those gains but is 5 point below the intraday low of March 17th. Some people would say this is a double bottom and that the market should move aggressively upwards from here. I believe, this is BS. Nothing in the US economy would for a moment suggest or faintly support this theory. Furthermore, since Oct 11, 07 the S&P has channelled downward with lower highs and lower lows. The S&P reached a high of 1440 on May 19 and never looked back again. ( OK I was out by 40 points).

I predict that the S&P will continue its downward movement and find real support at the 1050 to 1100 level with a lot of volatility in between now and when we reach those levels.

Again if your investments are still in the black then, protect yourself from downward pressures. How? Buy puts. Place sell on stop orders. If you are the sentimental type and you really love and would like to keep your stocks then, sell calls. Selling calls will give you some cash-in while waiting for the market to turn around.

Be careful out there !