Speculators to gain bearish exposure

2-12-13 S&P.jpgYTD the S&P is higher by just better than 6% as futures have moved just under 100 points in the last 6 weeks. As I’ve pointed out almost on a daily basis as long as prices dance above the 9 day MA (on the daily chart) we could grind higher but my stance remains the same that a 5-7% correction is long over due. More than a few traders say this time is different but I do not think that is the case. As a trader very early in your trading career you learn that past performance is not indicative of futures results but do not ignore history. Those that do are destined to repeatedly make the same mistakes. As one can see on a monthly chart that tracks prices back over 1 decade that the last 2 occasions that the S&P traded above 1500 we did not stay above that level for long.
In 2000 as the bubble was bursting in the equity market the S&P slid a slippery slope to lose 50% of its value in just over 2 years. It took just better than 5 years to regain those losses as an index putting the S&P back over 1500 in late 2007 early 2008. While we would like to forget we all remember the disarray in the global financial system at that time and again stocks were cut in half with a total loss H/L of 58%. Since bottoming at 666 we have seen an aggressive appreciation with very few bumps in the road over the last 4 plus years. With prices back above 1500 for the third time in 13 years will this time be different? We are currently 21% above the 100 day MA on the monthly chart.
I have advised investors for several weeks to establish hedges against their stock portfolios and for speculators to gain bearish exposure. To date this has been a losing proposition but the day of reckoning is ahead in my opinion. Whether it the state of the union today, unemployment numbers, disappointing corporate earnings, the debt ceiling, the fiscal cliff or an unknown event at this time there will likely be a one off event that the market overreacts to and then selling would follow…just my opinion. Assuming we put in an interim top around the same levels and prices correct just half the previous moves that puts futures at 1135 -1160 in the coming quarters.
Perhaps a bias opinion but I suggest looking to diversify into Managed Futures before this happens. Non correlated returns and a way to diversify, transparency, liquidity, favorable taxation in your portfolio…5 worthwhile considerations.
To discuss in more detail this chart or any other you can reach me at: mbradbard@rcmam.com or 954-929-9997
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.

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