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buffalonate (94.61)

Market Due For A Big Pullback?

Recs

6

April 28, 2011 – Comments (32)

The DJIA and S&P 500 are about 10% off of their record highs.  I have a hard time believing that it should be close to that high with unemployment at 8.8%.  With oil at $112 I think it is inevitable that the market has a big correction in the next couple of months.  Inflation due to oil prices is already cutting profit margins.  GDP rose 1.8% which is anemic growth and the stock market shrugged and kept going up.  I think over the next couple of months earnings growth is going to continue to be modest due to inflation and the market will eventually modify their expectations and send the market substantially lower.  The only value I see is the auto companies and the banks and that is because they are unpopular at the moment.  I have pulled my money out of everything else.  I have started putting money into 3X Bear ETFs and I will continue to add until the market corrects.    

32 Comments – Post Your Own

#1) On April 28, 2011 at 4:34 PM, L0RDZ (84.78) wrote:

Ok u keep doing that :)

 

 

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#2) On April 28, 2011 at 4:46 PM, kdakota630 (29.50) wrote:

I've been expecting a significant pullback for about 10 months now.

I think the statute of limitations for me to say "told ya" when it happens expired a few months ago.

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#3) On April 28, 2011 at 4:58 PM, buffalonate (94.61) wrote:

Bernanke said that the 1.8% growth was due to the government laying off employees and that he thinks that is temporary and growth will pick back up.  The federal government is going to be cutting spending pretty severely next year so I don't see how he thinks government cuts are temporary.  I was bullish up until oil hit $110 then I turned bearish.

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#4) On April 28, 2011 at 5:09 PM, TMFAleph1 (94.89) wrote:

I think the market is due for a pullback, but I would never express that view with 3x leveraged ETFs. Those products are meant to reproduce a multiple of daily price changes; meanwhile, the timeframe over which one can usefully forecast a correction is measured in years, not days. There is a very good chance you'll get eviscerated by compounding with that strategy.

Alex Dumortier

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#5) On April 28, 2011 at 5:28 PM, chk999 (99.97) wrote:

Will we get a big pullback? Yes!

Will it happen soon enough to make buying 3x bear ETFs profitable? No idea. But be careful, those are trading vehicles, not investments. 

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#6) On April 28, 2011 at 5:31 PM, buffalonate (94.61) wrote:

I am playing the odds on this one.  What is the probability the market hits a record high with oil over $110 and gdp growing at 1.8%?  I think the odds are much much higher there is a pullback. 

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#7) On April 28, 2011 at 6:08 PM, TMFBabo (100.00) wrote:

Interesting anecdote shared to me the other day:

Charlie Munger was once asked why he didn't short the Internet bubble.  He said he and Warren identified 100 companies that were going to go to zero.  Within several years, they all did.  However, if he had shorted all of those companies, he would've lost all his money.  

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#8) On April 28, 2011 at 6:13 PM, tfirst (34.58) wrote:

What we're seeing is the high tide of inflation lifting all boats. It seems you're forgetting the value of the dollar. I don't think we'll see a corrective pullback until the effect of all the dollars the fed is priinting, stabilizes in circulation. QE2 is supposed to end in June, the pullback won't happen until the spigot is turned off.  Listen to the fed, the moment they even speak about raising interest rates, sell silver and gold. I think you'll be seeing a lot of new highs in everything. 

 

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#9) On April 28, 2011 at 6:15 PM, Borbality (46.31) wrote:

The market makes no sense. If you try to make sense of it on a macro level, you might as well just do the opposite of what you come up with.

 

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#10) On April 28, 2011 at 6:18 PM, goalie37 (91.88) wrote:

3x leveraged ETFs?  

 

7 out.  New shooter. 

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#11) On April 28, 2011 at 6:18 PM, whereaminow (< 20) wrote:

Charlie Munger was once asked why he didn't short the Internet bubble.  He said he and Warren identified 100 companies that were going to go to zero.  Within several years, they all did.  However, if he had shorted all of those companies, he would've lost all his money.  

Smart.

A significant pullback would require another investment class for capital to flow to. In other words, captial usually flows to a higher return.

The question I need to have answered before I accept the premise that there is a pullback ahead is: what other investment vehicle is attractive enough to take capital away from stocks in the magnitude necessary for a pullback?

I don't think the answer is precious metals, at least not to the degree to take even 1% from total market cap, let alone 5-6% or more. (PMs are a much smaller investment class than stocks.)

The answer is most definitely not real estate. Not at this time. Bonds? Doesn't appear so.  To the dollar? Obviously not.  Foreign stocks?  Unlikely.

David in Qatar

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#12) On April 28, 2011 at 6:21 PM, buffalonate (94.61) wrote:

I made a huge amount of money on my laser stocks this month so I can afford to gamble.  If I lose more than 20% I will cut my losses.  I am hoping to get in and get out for a 10% gain. 

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#13) On April 28, 2011 at 6:50 PM, TMFAleph1 (94.89) wrote:

3x leveraged ETFs?  

7 out.  New shooter.

Ha ha ha... Awesome!

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#14) On April 28, 2011 at 6:55 PM, TMFAleph1 (94.89) wrote:

The question I need to have answered before I accept the premise that there is a pullback ahead is: what other investment vehicle is attractive enough to take capital away from stocks in the magnitude necessary for a pullback?

Cash. In a correction, investors won't be thinking in terms "attractive enough"; instead, they'll be looking for "less unattractive." With cash, investors aren't forced to pick another long-term asset class before getting out of stocks.

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#15) On April 28, 2011 at 7:00 PM, Momentum21 (93.26) wrote:

The question I need to have answered before I accept the premise that there is a pullback ahead is:what other investment vehicle is attractive enough to take capital away from stocks in the magnitude necessary for a pullback?

This is my premise for continuing to be bullish on the markets in spite of the fact that a pullback seems to make more sense. So I have found some common ground with David... : )

Cash, real estate and tulips are not an option right now. I don't think it will be easy money being long by any means, I just think it will get harder and harder to be short an index as volatility declines.

I am hoping to get in and get out for a 10% gain.  

Nate - the fact of the matter is that you are placing a bet where the odds are stacked against you in a variety of ways. It is fine if you proceed while recognizing that fact...many of us do it frequently...but Lithium Exploration Group is due for a pullback as well...timing is everything and there are too many variables at play to time a turn consistently. Options might be a better way to "gamble" on your call. As mentioned above the decay will make your risk/reward less favorable by the day.  

A series of low probability bets simply leads you to zero the longer you play...stay in the game.   

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#16) On April 28, 2011 at 7:05 PM, Momentum21 (93.26) wrote:

#14 - I think David's point is that the likelihood of a strong correction is diminished since cash is not viewed as an alternative in the current interest rate environment.

 

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#17) On April 28, 2011 at 7:07 PM, TMFAleph1 (94.89) wrote:

Nate - the fact of the matter is that you are placing a bet where the odds are stacked against you in a variety of ways. It is fine if you proceed while recognizing that fact...many of us do it frequently...but Lithium Exploration Group is due for a pullback as well...timing is everything and there are too many variables at play to time a turn consistently. Options might be a better way to "gamble" on your call. As mentioned above the decay will make your risk/reward less favorable by the day.  

A series of low probability bets simply leads you to zero the longer you play...stay in the game.

 

Entirely agree with this assessment.

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#18) On April 28, 2011 at 7:10 PM, TMFAleph1 (94.89) wrote:

#14 - I think David's point is that the likelihood of a strong correction is diminished since cash is not viewed as an alternative in the current interest rate environment.

That is understood, but my rejoinder is that, in a genuine correction, investors won't so much be concerned with yield as with the safety of their principal.

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#19) On April 28, 2011 at 7:13 PM, whereaminow (< 20) wrote:

A series of low probability bets simply leads you to zero the longer you play...stay in the game.

Way ahead of you, but my broker says there are no options available on this stock.

Anyone else find different???

David in Qatar

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#20) On April 28, 2011 at 7:15 PM, whereaminow (< 20) wrote:

Alex, 

That is understood, but my rejoinder is that, in a genuine correction, investors won't so much be concerned with yield as with the safety of their principal.

I agree that's possible. At this time, I don't think that's likely. Of course, I'm judging this from a small sample size. I would've figured on a larger correction during the ME unrest if investors felt a move to the dollar was safer. Maybe that is a faulty premise.

David in Qatar

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#21) On April 28, 2011 at 7:38 PM, Valyooo (99.42) wrote:

Earnings are good...thats all that I care about

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#22) On April 28, 2011 at 7:49 PM, rd80 (98.47) wrote:

What is the probability the market hits a record high with oil over $110...

Actually, pretty good.  The #1 and #3 weightings in the S&P500 index are XOM and CVX. 

 

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#23) On April 28, 2011 at 7:58 PM, TMFAleph1 (94.89) wrote:

Lithium Exploration (OTC BB: LEXG.OB)

Wow. What an obvious scam/ pump-and-dump vehicle.

Who are the people who get caught out by something that blatant? The outside shareholder roster must read like a list of Darwin Award recipients.

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#24) On April 28, 2011 at 8:41 PM, nuf2bdangrus (< 20) wrote:

Don't short.  Don't by leveraged ETF's.  Use options.  You can limit your risk that way.

 

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#25) On April 28, 2011 at 9:05 PM, awallejr (83.83) wrote:

Well if you want to try to time the market turns, that is your choice. Once in a while a person may be right, but more often than not will go broke before he was proven right.

This market since March of 2009 has been behaving "nicely."  What I mean is it isn't a parabolic rise off that bottom.  It rises, corrects, rises, corrects, etc.. The positive about it is that it keeps making a higher high off a correction.

Yup, there will, and I do want, a correction off this last streak.  When that will happen who knows.  Maybe Sell in May is the month, or June or not.

The point is, however, that corrections are the time to BUY and ADD to positions.  I invest, I do not trade.  I try to accumulate wealth, not try to gamble for that pot o' gold (altho there is nothing wrong with devoting some portion of your assets trying to hit those home runs).

The market has gone passed the financial crisis of '08 - '09.  Hedge funds and gamblers  deleveraged out. People are now doing what they should be doing, looking at earnings.  And with exceptions, earnings are coming in fine, showing that corporate America seems to be healing nicely.

This bull market has years to go. Trade if you want, but there are still a lot of compelling companies to invest in in the mean time.

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#26) On April 28, 2011 at 9:21 PM, buffalonate (94.61) wrote:

I am just making a bet for a month or two that the market will trend down enough to make some money.  I am not stupid enough to be a longterm bear.  I have made so much money on IIVI, IPGP, and RSTI in the last month I feel guilty enough to give some money back. 

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#27) On April 28, 2011 at 9:55 PM, AvianFlu (39.55) wrote:

Buffalo:

If you have any sense at all you will listen to everyone's warnings about triple short ETFs. I just read the prospectus for two of these and the very first sentence said, "These are intended to be held for 24 hours only". Buy in haste...repent in leisure.

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#28) On April 28, 2011 at 10:29 PM, TMFAleph1 (94.89) wrote:

Collective wisdom will never supercede a painful experience as a source of learning, particularly if one is adamant about refusing to learn from others' experience...

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#29) On April 28, 2011 at 11:00 PM, buffalonate (94.61) wrote:

I have beaten the market every year for six years.  It is getting so easy as to be boring.  I have just recently decided to get into some leveraged stuff for entertainment.  I bought two different leveraged financial bull etfs(fas and kru) recently off technical lows and I am 10% and 15% respectively and I plan on keeping those for a while.  I have never bought a bear etf before but I like my chances.  If I lose money, oh well, I have more. 

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#30) On April 29, 2011 at 1:58 AM, awallejr (83.83) wrote:

It is getting so easy as to be boring.

Oh well your credibility went out the window on this one.  That 34.33 score is telling. You prefer losing your shirt?  Please don't reply.  I wasted my time here.  Good luck.

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#31) On April 29, 2011 at 2:08 AM, TMFAleph1 (94.89) wrote:

I have beaten the market every year for six years.  It is getting so easy as to be boring.

Your lack of humility in an arena that many very smart people consider extremely challenging is disturbing. Inverse 3x leveraged ETFs go hand in glove with that attitude; you're sure to come out a winner. 

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#32) On April 29, 2011 at 10:06 AM, buffalonate (94.61) wrote:

I have only been on fool for a month and I have shorted a lot of tech stuff that is why my score is low.  I have a marketocracy portfolio that has beaten 94% of the people on that site just using buy and hold.  That is kind of boring so I am now using leveraged etfs to play the technicals.  It is far more interesting when you raise the stakes. 

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