Quick market update

If any of you subscribe to Dow Theory, you will notice the divergence between the Transports and the Industrials over the last several days as being a fairly significant bearish indicator. While the Industrials have managed to reach a higher high, the Transports have not.

Furthermore, despite all of the major economic reports being fairly positive of late, the S&P has still failed to rally. The old adage comes to mind, "if the market should go up, but it doesn't, that usually means that it's going to go down!"

And on that note, I chose today to buy some puts on SPY. Good luck all!

Are we due for a correction?

Factors in favor of a correction:

1. Summer doldrums. There's a lot of money away from the table - on vacation.
2. Overvaluation. Stocks in the S&P 500 are trading at their highest P/E ratios since 2004. This makes it very difficult for any more surprises on the upside to materialize.
3. Big spike in the Volatility Index (VIX) witnessed today, bringing us back to early July levels. VIX is a good proxy for perceived risk in the markets; thus, market participants are getting more scared...

Factors in favor of a continued upward trend:

1. There's a lot of money sitting on the sidelines. These investors are growing more and more frustrated about missing out on the rally that's been in progress since March, 09. They add support on the bid side everytime the market moves lower. What happened today?
2. Put/call ratios are actually relatively low, as of August 14, 09. This implies bullish market sentiment.

Factors that could fall on either side of the fence:

1. Economics. We continue to get bombarded by mixed reports on the state of the economy. However; the reports do imply that things are getting less bad.

In my own humble opinion, I believe at present the factors are more heavily weighted in favor of a correction at least through to the end of August. September will be a telling month when the big boys away on vacation come back to play.

How are we going to make money off this? I'm currently long, but I would still like to buy September puts on SPY.

Welcome to Market Gladiators!

This is where we duke it out to see who can make the most money in the markets!

I'll be posting daily market recaps and short, medium, and long-term forecasts on where the markets are headed. As I currently still have a day-job, I'll be sticking to equities markets for now (TSX, NYSE, NASDAQ, etc.). For my posts, I'll be drawing on my education in business, economics, and political science, along with my own experiences trading equities over the last couple years.

That's all for now. So until tomorrow night, good luck all! Let's make some money!