As I mentioned in my last newsletter the market will have a counter rally this week and that happened.  For non-agile kind of trader, it is hard for them to trade in such turn around environment.  However in my opinion, the return does not judge the risk to invest during this extremely volatile environment.  Why?  It is because if you are on the long side, you will be punished in this ongoing bear market.  If you get caught once, your capital and returns can hurt real bad and that’s hard to recover from that.  So what should we do?

Stock Market

Its volatility is still high, unless you are an expert day trader, you rarely can make profit in this kind of environment.  For beginners and novice traders, if you really want to participate, I would recommend you use 10 – 15% of your money for your tuition fee and you may get a rebate.  Or simple put the small portion in a bear ETF and watch it grow for another couple months.

Bonds

As a sign of weakness in the short term, this may extend into intermediate and even long term downward cycle.  It is most dangerous asset among the others as of this moment.  As I mentioned in my previous newsletters, this is currently the king of bubble an overvalued asset based on nothing but a sucking black hole.  Once it explodes and shutters the universe, the fiat money will flee to its original form which is US dollar.

US Dollar

Another overvalued asset thought it has deflated for more than 10 years and it will begin to show some strength during this deflation period.   Our model shows US dollar started to show upward since last month and I expect this trend will last another couple months.  As all we know USD is negatively correlated to the S&P, the projection of both big pictures matches each other.  As you know, stay in cash mean you are positioned in US Dollar and from an investment standpoint, you are will investing.  This might be the sounded asset as of this moment.

Gold

Our model shows gold is still in long term upward trend while the intermediate trend is downward, my assumption is gold is consolidating and will resume back - upwards.  Since we know that gold is negatively correlated to USD, what we can explain is the correlation may phase out overtime and both USD and gold shows the purchasing power in this deflation period.  Since the recent correction was quite big, I would think this is a buying opportunity while gold stocks would be another alternative.  I would think purchasing physical gold would be a better choice of all cause people are selling at the moment and you may get a better deal on premiums.  I think the gold bull is still intact, and the bull is just resting.

Site Development News

While I am researching and developing the site, I wrote a program to scan over 6000+ stocks and 1000+ ETFs using the monthly trend model.   This service will be in addition to the service we currently provided.  We will get heads up on the potentially bottomed stocks which just reversed to their upward trends.  As we know monthly trend is the most guaranteed signals compared to the weekly and daily trends.