I can visualize people in CNBC spelling doom and gloom. It is very simple actually, the market is in consolidation waiting for news about the debt ceiling (see charts below). I assume it will be back and forth until August 2 and then we will see. If I were you I would be hedging my portfolios with some puts or vertical put spreads. Directional calendar or butterflys way out of the money and built on the cheap could work too as hedging vehicles. S&P below 1250 spells trouble for the markets as a second massive wave of selling would start (ala October 2008). As a contrarian, panic selling are my favorite days of buying and accumulating stocks that their long-term fundamentals look good.
How about them GMCR featured yesterday by this humble servant? We take 16 percent in a day as a good return… As always, intelligent comments are most appreciated.
SP500 weekly 7-28-2011
SP500 daily 7-28-2011
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That panic selling actually really did start and it moved to all over the planet. We have had 1/6 removed from our stocks in one week. Now it’s starting to look good to buy again those stock that have fallen the most for a nice rebound.
It is too early to start buying. S&P downgrade will have so many repercussions in the economy that will not end soon. This is just the beginning. Any bounce is shortable. There is no value out there.