As my fears have proved correct, I believe that today's Chinese market sell off will be the spring board for further global corrections in the stock market. I believe we will also experience a sharp sell off this morning when the market opens. Currently, the NASDAQ futures are just under 16 and Dow futures are just under 60. I believe we will see continued correction in our equity markets and we will continue to have price pressure well into this summer. I will now buy vigorously equity option puts in the following companies:
1. BAIDU (BIDU)- we can expect to see prices as low as $50 if this correction is more than a correction in the Chinese market.
2. Google (GOOG)- I expect this stock to correct below $400 if this correction gains steam.
3. RIMM- I expect price below $90
4. AAPL- I expect prices below $60
I am going to buy puts hand over fist to augment my BIDU puts that I purchased yesterday. I believe we are undergoing possible global stock market correction. As I alluded to before, there remains significant stock market risks, and we are now seeing the inflection point for this down turn. I do not think that this will be a one day wonder. In a jittery market, this will gain steam and should see significant corrections ahead.
Take the losses and protect your capital and if possible, go short.
Be careful please!
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2 comments:
January was record month for margin lending (even more than January of 2000). When margin calls start, the selling will continue. Expect BIDU, ICE, CME, and other high profile stocks that were purchased with margin to drop like rocks. Undoubtedly will be overdone, but may easily see BIDU at or below 50.
Good point! I also know that we have become pretty complacent in this market. I started to turn bearish towards the end of January this year when my trades were not working out. But most importantly, I was reading between the lines from the financial media which does not have the best interest at hand. I believe our stock market is a collection irrationality that "corrects" to rationality, albeit for a short time. I agree that margin will be jet fuel to the problem that we now face in the equity market. I was laughing at all the "financial" gurus that were saying things to rationalize this market. As I have always said, opinions don't matter, the market does. Good luck!
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