If you are new to the concept that Market is not always going up welcome to this education session. Today in Google's share price we had typical Bear Market behavior: it is called "Sell the Rally". Despite of all spin by Bubble Media and Recent Upgrades stock is barely fighting gravitation and collapsing by the end of the trading session to the day's low. Google is so important because it is the Barometer of Recent Irrational Exuberance in the Market and is acting as an important benchmark of valuation based not on clear understanding of Business Model protected by Franchise: its unique value proposition, brand connection, customer loyalty and highest possible switching cost to its substitution, its pricing power and ability to generate cash flow or asset value (which is important Value Metrics for commodities area), but by pure speculation about the possible future outcomes of "perceived by the crowd technological leader".
Google Stock is not reacting to positive spin any more, it is very important bear market observation. Institutions are using every opportunity to exit the stock positions and selling into reaction rallies after clear Fundamentals' Deterioration and Technical Reversal Pattern. What will be very important here: to stay alive, close all speculation positions in Tech and protect your capital, do not be afraid to miss next 24% upside (which consideration ignited UBS Buy rating) but to lose 50% of your Capital if they will happen to be wrong. Rising tide is lifting all boats, the most dangerous mistake is to think that your own genius have brought you there and not the rising liquidity flow. Once markets are tightened by increased rates nominal and real ones shock waves will start to unfold in the places of most leverage application: Housing via repackaged mortgages and connected to Carry Trade Derivatives and Credit Swaps. It will tighten money supply available to maintain positions further and will trigger margin calls on Trade Houses levels, the only way to survive for them will be liquidation in the Market. Suddenly everybody will run for the same Exit. Cash, cash and cash: formula for Bear Market - if you have a profit take it. The most important thing is that when Bear returns all Talking Heads will be telling you that this is just a correction until it is too late and Common Sense math will kill your investment future. Have you ever noticed that by losing 30% you will need asset to increase in value by 42.9% just to bring you back. that is why Buffet's rule No 1 is "Never lose money" and No 2 " Is never forget Rule No 1". It is still not too late, take profit and think for a while, you will not miss anything: your capital will be safe and if I am wrong you will not earn some money which is completely different to losing part of your Capital. If you have Capital and Health, new ideas will come, you will write me an angry comment and will find another blog to follow. Here it is Very Important, do not Trust anyone and Do Not Follow anyone's advise, including mine: it is only some thoughts to think about and in some places you can find more productive ones then in others. Also as you have noticed I almost never giving Sell after Buy Idea (or Buy back after Sell) it is completely up to you when to establish position and which size of profit to take. I am never selling short and prefer counter trend exposure: falling USD - Gold and Silver, for more leverage - quality Juniors (options on underlying metal without time decay). Going Short I am buying Puts limiting my Risk to maximum loss of Initial position, needless to remind you that here apart from Value Timing is crucial and Technical Analyses is followed. Same approach is with Calls on my Bullish positions. Core positions maintained in long term approach according to the main investment idea I am following at the moment, trading opportunities are used to create Capital in order to increase core positions on Reactions in the Bull Market. New family of ETF created by Proshares for Bear market applications could be very usefull - they allow to create bearish exposure without time decay and your loss will be limited by initial position. This range is very wide from Basic materials and up to Health care and imply 200% leverage in opposite direction of the benchmark index. Their tickers are SZK, SCC, SKF, SRS, SU, SSG, and REW.
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