Market Direction – Short Term Pullback But Probably Higher Still

Aug 292011

I believe the market direction is higher still. The market could easily pullback tomorrow or the next day, but the market direction is intent on climbing further. I believe the S&P will try to reach 1260 and hold but again sell-off. The market direction question for August 29 2011 is, can the market hold and not fall below 1260. I rather doubt this.

Whether or not this is a bear market really doesn’t matter a lot at this stage. A bear market can drag on for months or years and fool a lot of investors, both retail and institutional. Today I received a lot of emails from readers wondering if I will be changing my stance back to bull. I have to draw to readers attention my financial investment strategy earlier this year was the cautious bull .

With the selling in July and the heavy selling in August, all the signs of a bear market are there and I indicated on August 1 that I believed the bear market had returned in my article “Goodbye Old Friend, Goodbye.”

Yesterday I wrote an article discussing some of those signs. The signs I discussed are classic signs and are not signs of a bull market. This for me though does not mean it is time to retreat from my strategy or that I think the market direction is straight down. In fact far from it. The heightened volatility makes selling options all the better and the chance for big gains keeps me in this type of market. I don’t fear the bear, I embrace the bear. In a bear market the returns can be truly spectacular despite the market direction being overall down.

VISA STOCK Returns 6% In 6 Trading Sessions

Remember bear markets have great rallies and can trick a lot of investors. The key to market direction in a bear market is watching the VIX Index. It is volatility that creates the opportunities for some very simple profitable trades. My Visa Stock Trade is a good example.

On August 19th with options expiry I accepted 1000 shares of VISA stock at $82.50, as the stock closed at $79.60. Today I sold my 1000 shares in VISA for $87.50. This is a 6% gain in just 6 trading sessions. This is what volatility can create and is why I stay in the stock market during bear markets.

There are terrific opportunities in these markets for those who are willing to take their time to understand the market direction trends and in particular the stocks being traded.

Market Direction – Higher Than More Selling

Present I believe the market direction trend is higher.

We could easily see a pullback over the next day or two but the market should push higher before it sells off again and market direction turns back down.