OGT Newsletter (Issue No. 2)
Dated 13th October 2012
In this issue, we will be looking at some opportunities for trade since the markets are showing signs of being overbought even with QE3 in action.
But first, let’s review what happened after we posted OGT newsletter issue no. 1. True to our earlier newsletter post on S&P, the S&P went down below 1350 from 1369 and touch a low of 1266 on 4th of June 2012. Going short based on our recommendation would have yield quite a decent profit. The FTSE also broke through 5500 and even though it did not test 4900, it eventually touch a low of 5229 from 5655 which would have yield a decent profit from the trade as well. The Hang Seng Index also follow the above and went down as well during the same period. You can check out and read our full OGT newsletter issue no. 1 here.
Looking ahead, based on our technical analysis, the US markets are already in overbought situation and a correction is long overdue. The European markets overall are also in sync with the US markets showing signs of turning down as well. However, we always let the markets tell us that it is ready to correct and move down before we go in.
For the S&P, a correction will be confirmed with the index breaking through the low of last week of 1425. When that happens, we will be looking for more opportunities to sell short stocks and maybe even the index. However, if the index goes up and break the previous high of 1474, we will be looking to add to long positions. But right now it seems unlikely so we will take lesser positions on buying stocks to go up since we do not want to go against the trend too much. In fact, currently in our portfolio, we already have 4 stock positions on the short side and only 2 positions on the long side. Therefore the strategy ahead if correction is confirmed, will be to add to shorts and not to long positions. If the correction is in place, our target for the the S&P will be 1325 and it may even go lower which is hard to say for now till the markets tell us.
The European markets are almost in sync and same as the US markets particular the London FTSE and Paris CAC. Therefore, those who don’t trade the US markets can also look for shorting opportunities in shorting the markets discussed above.