Range-bound Market no Longer for Stock Pickers
Under current circumstances however, it is NO LONGER TRUE. This is not a stock picker’s market. If you buy individual stocks, even ones with good fundamentals, stocks that have been beaten senseless and trade at levels you could not have imagined just a year ago, you are still more likely to get burned in the short-term.
So consider this. On days like today when the market is down 700 and one can reasonably assume that it might go down another 400-500 tomorrow or go up 500, buy something like SSO. This is the Ultra S&P 500 ETF, that goes up two times as much as the S&P index or down twice as hard if S&P goes down. Today, this ETF shed 17%. I bought some right before the close and will double down if it falls to $25 tomorrow. If the market goes up tomorrow, I already have a sell order that will execute at $34. Risky – yes. But so far, it has been working.
On the flip side, when the market rallies, buy EEV. This is the Ultra-Short Emerging Markets ETF which goes down with twice the intensity when Emerging Markets rise. At around $100, it is a buy. At $150, it is a sell. In a range-bound market that goes up and down like a rollercoaster everyday, this is the best way in my opinion to make some money. Buying individual stocks is not as cut and dry.
Faisal Laljee
– Full Disclosure: I own SSO but my position can change anytime without notice.
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Completely agree on SSO. (the option premiums are all over the place)
I believe there is another alternative… how about living the stock market and doing some real investment?