davidbdc

What to Short When the Rally Dies

Businesses reacted very quickly to this downturn and will be more profitable on a relative basis than in past recessions.

In March we reached a level that was basically pricing in something worse than the great depression. So I wouldn't bet on returning to those levels. If companies continue to show profits, the US and China stimulus spending should help generate some growth later this year and there would be no reason to go back down to 666 on the S&P. 8200-8600 is a reasonable level for stocks through the summer if things keep slowly getting better. Can they go down in the mid 7000's? Yes, and they could also reach 9000.

Bottom line, if you believe we'll start to emerge from the recession this year then the move isn't overdone. If you think the recession gets even worse from here then, yes, stocks will decline. Time will tell.

And finally, if you want to write an article about what to short - at least name some stocks. Shorting the S&P doesn't give you outsized gains - it either goes up or down and will do both over different periods of time. Pick a stock thats at $50 heading for 7 - now that would be a worthwhile read.