IF THE MARKET GOES DOWN....

I mentioned to my last blog posting (prior to Hari Raya) of the possibility of a Market Crash. Next week will tell whether we’re in for another roller coaster ride ala August 2007. Once again, it could be turbulent until the Fed decides on Interest Rates on Oct. 31st. Does the crash cometh mean we stay out the markets? Nope.

So what do we do if the market tanks (at least in short term)? Here’s what we do:
1. Buy strong stocks at RSI-2 and do covered calls, and set up credit spreads on the weakest ETFs (some weak ones include Russell, Financial Spiders, and Utilities Spiders)
2. Short USDJPY or buy a put option on the Japanese Yen pair (or Short the Yen pair and protect yourself by purchasing a Call option)
3. And if you’re more adventurous (for the experienced), consider buying the EURAUD, which seems to spike when the market is tanking. Here’s the latest chart from DailyFX predicting a rise for the EURAUD. If the market is in for a breather, then we have an Elliot Wave supported by Fundamentals
4. For Malaysian stocks, I’d be in short term mode and look to buy the shares which have rallied recently, looking for a “snapback” once the fear factor diminishes. Some of these stocks are Jaks and Kossan. The rises last week were supported by expectations of growing business (I call it fundamentally based speculation).

Here's the Chart on EURAUD on DailyFX:



Here's the commentary from DailyFX:
"Commentary – The rally from 1.5631-1.6072 is a 5 wave rally, indicating that at leas one more similar rally will occur. In recent weeks, we have showed the long term support line that dates to 1989. As such, the recent turn higher may be a significant one. A small correction is playing out now and fibo support is at the 61.8% of 1.5631-1.6072 at 1.5800. A push through 1.6072 exposes former support (may now be resistance) at 1.6400."

But I’m still bullish overall, although we may need another bailout by Chairman Ben at the end of October. As I mentioned to my broker, we'll have to face and get through a very tough October.

P/S-Fundamentally, if China and India slows down, we’ll be toast! If they go on and grow, there’ll be a big demand for commodities which should fuel the rally for Oil, Steel, Commodities, Drybulk, Aussie dollars, etc. Imagine hundreds of millions of people gravitating to the middle class! The steel and drybulk sectors look good. My calls on Excel and AKS Steel were exercised this month, for a gain of 15.5% and 12.4% respectively. Nice gains on a “conservative” strategy. Go China and India…..