Some believe that the market is in a trading range while others believe that a major correction is on the horizon. At the present time my portfolio is positioned for a correction and patience is the key.
The market has given me the correction that I’ve forecasted but there seems to be technical support in the Dow at 8250 and some resistance at 8500. As of today it is slightly below its 20 day moving average although it has easily broken through it more than once so what do the charts tell us?
I tend to believe that 250 points on the Dow is quite a small range and the fundamentals still don’t seem to point to any good reason to go higher so I’m still of the opinion that a 7% to 10% correction is coming.
How am I positioned for this prediction? Mostly in ETFs and defensive stocks. Let’s take a look at the ETFs:
SKF- This is a 2X levered short ETF that tracks the movements of the financials. This has been a great trade because of the volatile nature of financials. Many also believe that financials are overbought and may lead the market down. I’m becoming a little skeptical and think that the finance trade may be coming to an end.
DXD- This is a 2X levered short ETF that tracks the movement of the Dow. This has been an ETF of choice for me for quite some time. I think this has some legs to it.
DDM- This is the brother of the DXD as it is a 2X levered long ETF that tracks Dow movement. The trick is that when you find the Dow trading range you trade in and out of these two. Right now, I’m overweight DXD but once we get to the bottom of the range, I will switch that to overweight DDM.
XLK- This is the SPDR Technology ETF. It tracks the movement of selected stocks in the tech. sector. This will be a buy around $16.75 so patience is the key. This is a longer term trade. This one is going in to the 20s but it will take some time.
These are 4 of my favorites. Post some of your favorites for us!