mirkotoscano's  Instablog

Us Markets are in correction mood with a few of distribution days happened in last weeks. The movers were basically: 1) disappointing labor market data in March; 2) China's growth slowing down; 3) Europe's mess "on" again because fear of no growth in Spain and Italy for a long period.

In this environment, Us market corrected but at a level much more limited than Euro market where IBEX (Spain) and FTSEMIB (Italy) plunged.

What could happen now?

There're many geopolitical event in the next 3 weeks that could drive market and sentiment up or down strongly.

This is a list: G-20 meeting, Fmi meeting, Presidential election in France, Political election in Greece, Regional election in Germany and Italy. Unless an unexpected good agreement is reached next week when G20 meet in Washington about european firewall, the "risk off" situation could continue, especially in Europe but this could affect US markets as well.

And is earning season now, therefore the results will impact as well.

I recently updated the list of universe among I monitor/choose my stocks. I believe in QE3 from Fed in coming months and Bernanke's put that will be able to stop the FIRST downturn of market (only the first, don't know if will be able to be efficient when market will go down again and could have another 2008 in 2013).

Basically I look for market leaders with sound fundamental (compounded growth earnings, revenue and dividend in last quarters). After the first fundamental screening, I select stocks in uptrend to be able to enter long on breakout or correction if they reach 100 or 200 moving averages or a buy-setup is created.

Because I fear that we could have a period of choppy market in coming months where you could be easily stopped even if you are right with the direction on a 3 month period, I'll avoid long call position and cash. I think I'll go with option spread 3-6month expiration. Buy it and let it expire in max loss or taking profit at 90% of maximum profit if price move in my direction. And with a profit/loss of 1:1 or 0.7:1 (basically going long little deep ITM call and selling ATM call)

These are stocks I have under screen now (but they could be cancelled or new could be added in coming weeks with new earnings): CF, FMC, HOG, LAD, M, PVH, PII, SRE, VMI. Stocks are around 50 but these have chart I prefer more at the moment (buy am not still buying)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.