Markets climb a wall of worry....that's how the saying goes. I'm noticing more and more news headlines with the word "recovery" in it but after scanning the web, I still find that the typical retail investor is skeptical and those who are more optimistic and are playing the long side are doing so only cautiously. They aren't going to fall for the "buy and hold" trap again they claim and so they are quick to take profits and quick to bolt at the first sign of trouble. This is the type of psychological environment that is perfect for a bull market. Last week there was quite a large redemption from mutual funds and ETFs by mom and pop investors. In fact, it was the largest redemption week since February! And for what? Because of a measly 2% drop last Monday (which got almost completely recovered by Friday)? The bad memory of last September and all of the hype about how September is historically the worst month of the year probably added to the fear. Either way, this behavior proves what I mean about how quick longs are to bolt. So long as so many people keep looking over their shoulder for that bear to come back.... the bear ain't going to come back.
I still believe markets are in consolidation mode here but I will be quick to abandon this notion if market action suggests otherwise. In the next few weeks I suspect the market is going to be tricky burning both bulls and bears alike so you better beware if you are trying to play the short term moves. If you are a longer term bull then you shouldn't be bothered with this minutia....selling longer dated OTM calls against your holdings is not a bad idea. Take comfort in that so many others are uncomfortable with buy and hold which means buy and hold is probably the correct strategy!
As I mentioned I have been compiling a list of Canadian mining stocks. In that search I also uncovered a few non-mining plays with interesting prospects and great charts. I have already started buying a couple of these stocks and I intend to buy more at opportune times...hopefully this week. These plays are going to be "all or nothing" type plays because they all have the potential to gain 200% or more. Therefore, I will be willing to lose 100%. These stocks will NOT however, represent a substantial ammount of my portfolio wherby I will be crippled if these stocks drop say 50% on average.
Never under any circumstances break the golden rule of investing/trading which is don't put yourself in a postion wherby if you are wrong you get wiped out. Either use stops or like in my case above, limited exposure.
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