Market expectations

Today’s trading is over and the markets added to their gains and added to their overbought pressure. Everybody is already talking about correction behind the door, but the market is still strong and marching up. Investors are still pouring new money, moving more cash to the stocks on every dip. It really is something which should make every savvy investor cautious.

Fear and Greed indicator is at 86 level – still very elevated. Optimism is supported by investors confidence data from Germany, but not economical improvement. US homebuilders confidence fell down from previous period. All that can quickly turn into negative and investors can run away from the market very quickly.

I am waiting with my new purchases or additions to see what happens next. I do not want to be buying at the current price levels. There are stocks out there, where you can already see some pressure and slow down.

I might be wrong and I do not want to be predicting the market movement, but I think, it would be wise to wait at this moment. However, I have a few stocks I am currently watching closely being ready to buy.

One of them is McDonalds (MCD). A fenomenal stock in my opinion. Last week I have read an article, why you should sell MCD today and buy it later at a lower price. As a dividend investor I do not agree with this strategy, but I take it as a great opportunity. If the author is correct and bad data from MCD, in my opinion temporary, really push MCD down to $84 a share, which again I do not think is a realistic expectation, I would buy more shares. I agree with another investor, Craig Van Pelt, who posted his story witnessing opening of McDonalds stores in Russia and what wonder it did to Russians, that MCD still has great power around the world to easily overcome any consumer drops today. I have a similar experience from a post-communist East European country. As MCD is expanding to other countries, it will provide realitively cheap fast food to inhabitans of those countries. In many occassions I remember McDonalds was considered a restaurant with high food standard in quality and assurance that the food is checked and fresh as opposed to many local restaurants. If any problems should occur, they will be temporary and create a great opportunity to buy MCD for cheap.

Another stock I am considering to add to my portfolio is Gold ETF (GLD). Gold is currently heavily shorted. I believe that in long term this is another opportunity to buy more shares. Given the monetary policy of FED and ECB currencies will decline and that will push gold up. The banks are buying gold heavily, so all the hype around gold these days look like a shake out to me. I plan on holding gold for another 15 – 20 years from now. Given the time frame I think, this would be a good time to buy some more shares.

Last stock in my nearest focus is 8×8 Inc. (EGHT). Today I did some reading about this stock as a candidate for covered call and I liked what I could find on the internet. The stock is currently in correction phase and the correction is in line of the previous corrections. If we assume that the stock market moves in some sort of a rythm repeating itself, than I am assuming EGTH would act in similar manner in the future. Given that the stock may grow up at or above $7.5 per share and that will be my play. I will buy-write a covered call trade expecting the stock to be called away.

In the near future it looks like the market will continue its upward move with some minor stops or slight corrections. We are not exhausted yet to see some major pullback. My strategy will be however waiting for it and adding new trades carefully.

Happy Trading!







4 Responses to “Market expectations”

  1. admin says:

    @Dan,

    I do not try timing the market either, just waiting for minor pullbacks or major pullback and then buy more, that’s it. Not trying to buy low and sell high. I tried in the past and it’s almost impossible.

  2. Dan Mac says:

    Personally I don’t believe in market timing. I buy and hold for the long term. I wouldn’t mind a pullback in MCD and if it does look forward to picking up some more shares for my portfolio!

  3. Brian says:

    Would you be adding the gold ETF to a tax sheltered account or to a taxable account? The only reason I ask is because if it is in a taxable account you are taxed at the 28% collectables rate. Just some food for thought…

    • admin says:

      Brian, I will be adding to a taxable account. Thanks for the thought. I will need to consider this (and I assume) when selling GLD 20 years from now.