Friday, May 3, 2013
STRETCHING, STRETCHING, STRETCHING
The runaway move in the stock market that we have been watching over the last few months continues to stretch higher and longer. Let me emphasize again, these things always end badly. Usually in some kind of crash, or semi crash.
I strongly advise traders not to chase this move. It's way too late and risk is extremely high. If you don't time the exit perfectly you risk getting caught in the crash.
The way to correctly trade a runaway move like this, is to wait patiently for the crash to unfold, and then buy long as the Fed doubles down on QE in the attempt to reflate asset prices.
The crash could happen at any time, but based on the intermediate dollar cycle, which is due to bottom in late June or early July, I'm expecting the stock market swoon to correspond with the dollar rallying out of that major bottom. So my best guess is in late June or early July we will see this artificial rally come crumbling down.
Let me emphasize that while I think the crash is going to occur later this summer, there is no guarantee it can't happen sooner.
On a side note: I heard a commercial yesterday in Las Vegas for a seminar on how to get rich flipping houses. Seriously? Are we really stupid enough to go down that road again?