After an entire quarter with only a few down days, equities are finally running out of steam. This is most likely the start of a correction which will probably end after a couple of months. We will then have a strong rebound rally which will most likely achieve the highs of 2012. This final rally may end up forming higher highs for lagging indicators, i.e. SPY and QQQ; and lower highs for leading indicators such as SMH and hard-asset ETFs. We will be watching out for this topping pattern very carefully.
During the final rally flock investors will be selling their safe haven assets such as TLT (long dated US treasuries). At that time, when nobody wants TLT, we will start buying this ETF.
Within the next few trading days, we are looking for an opportunity to take position in HDGE, which as you all know is a pure short position ETF. We’re anticipating an important mid-term bottoming process to take place within the next couple of months and HDGE is an import and ETF to park a small portion of our cash.