Market Outlook: Value Investors Rule

Value investors currently rule the market. They are grabbing shares at prices that have not been seen in five years. These investors are willing to risk further volatility, betting that we have reached a bottom or are at least very close to one.

But will the positive sentiment last? The answer is simple. No.

This credit-induced hangover will continue and the markets will drop once again. After all, economic slowdowns do not go away overnight.

A lot of investors got locked into positions earlier this week that they could not unload. As soon prices rise and they get the chance to unload for a profit over the next few days, you can bet they will sell every stock they can. Eventually, sellers will outnumber buyers, and prices will drop.

Hopefully, Congress can agree on a bailout bill before the momentum changes. If not, another major sell-off could occur. The next few days are going to be very interesting.

Even better, they are going to be filled with great profit opportunities.

Volatility leads to big profits

Speaking of profits, if you followed my advice (click here and here for original recommendations) and bought McDonalds (MCD) and Under Armour (UA) put options, congratulations. You are sitting on hefty profits.

With Wall Street looking extremely fragile and volatile, it is best to take profits while we still have them. Do not risk these kinds of gains, looking for slightly bigger profits. It is a bet you will often lose, especially in the options game where time decay is constantly fighting against you.

Sell your McDonalds December 62.50 Puts [MCDXZ.X] right now for gains of over 30%. Also sell your Under Armour January 30 Puts [UAMF.X] now for gains of over 70%.

Once again, congrats on the profits.

I just recommended a new buying opportunity that will allow you to profit from the current situation. If you are looking to reinvest all or part of your profits, check out what I have to say.

Remember, as long as the market is moving, you have a great shot at making money. The greater the moves, the bigger the gains. I think we just proved that theory.

Disclosure: None

Comments

[Socialism c...:]

"Hopefully, Congress can agree on a bailout bill before the momentum changes. If not, another major sell-off could occur."

Actually, we just saw what happened following passage of the bill -- a hellish week on the Street. Socialism and ramped-up government spending are *not* the answer -- we're going to enter a period of stagflation as a result. Should have let the rotten fall!

2008 Oct 14 11:31 AM