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Short in May and Go Away

They have a PR campaign trying to maintain this rally. You can use as many CAPS as you want and a 3% gain isn’t too newsworthy. JP Morgan will soon have their credit card exposure drag the stock much lower. And another powerful indicator — foreclosures — just rose to record levels. Add in General Growth filing the largest U.S. real estate bankruptcy in history and it is peculiar that both the Dow Jones U.S. Real Estate Index and market reacted by rallying strongly. It seems to me like the situation is worsening but the markets want so badly to see the rally continue. Many are convinced that a bottom is in. While I would be happy to see the economy begin to recover, it is highly dubious that we have seen the worst of things.

Investors often sell and May and go away for the Summer. Low volume and sluggish performance so the theory goes. But I think this May will prove a better opportunity to Short in May and Go Away. Just don’t go too far. Our strategy involves quickly limiting losses whenever the market moves against one of our trades. You can subscribe to the premium service to receive email alerts whenever I am buying, selling or making adjustments to the GSB Portfolio. We are up over 60% so far in 2009.

It seems like a good time to short the market with a few of our favorite ultrashort/leveraged ETFs:

Ultra Short Real Estate SRS
Ultra Short Financials SKF

These funds are at all-time lows and the downside seems pretty limited compared to the potential gains should these funds retrace even half way to recent highs.

You can go broke diversifying. Ask anyone who’s diversified in the last three years. They’ve lost money. Nonprofessionals are always jumping around, thinking they have to do something. If they have a big success, they think they need another one right away. That’s when hubris sets in at its worst. That’s when people really should go to the beach. It happens to me too. – Jim Rogers

By | 2017-03-23T14:06:36+00:00 April 16th, 2009|ETF Corner, Gold & Silver Commentary|

About the Author:

Jason is the founder of goldstockbull.com. He previously worked in data analytics for the world's largest research firm, consulting to Fortune 500 companies globally. Jason eventually leveraged those skills to trade successfully full-time and after helping friends and family optimize their investments, he launched Gold Stock Bull and The GSB Contrarian Report newsletter. Jason is a cycles investor with a contrarian eye for identifying undervalued assets. He has built an expertise in both the precious metals and cryptocurrency markets. Jason believes in honest money, limited government, decentralization of power and enjoys studying alternative economic models.