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Chicken Little Sings A Diddy

Chicken Little Sings a Diddy

"The secret to getting ahead is getting started" - Mark Twain

Good day members,

As Chicken Little once said, "help, help! The sky is falling."

Run for the hills! Stock up on canned foods and survival supplies. Start digging that bunker and learn to live off the land. After all, Greece is on the verge of 3rd world status, Iran continues to laugh at our "negotiators", the Chinese stock market is a piece of junk (made in China), Puerto Rico is on the verge of massive default and the Good Ole USA is next in line for the proverbial haircut…

Once you reach the safety of them-there hills, yell aloud at the top of your lungs "the end is near!"

But remember, that while you scream your head off, the smart folks out there will be preparing to buy up everything you ran away from… for pennies on the dollar. Dear readers, the sky is not falling; Chicken Little is wrong yet again.

However, some blood is finally about to run in the streets and the buying opportunities are about to be aplenty. Remember, the late crowd (average Joe retail investors) buys tops and sells bottoms… not us. Timing is everything… and we've already gotten started.

Over the course of the past two months or so, we've been preparing for this pullback. We've looked at some "safe harbor" plays, some strong dividend paying stocks and even longing the US dollar.

And last week we discussed how the S&P 500 was terribly overvalued with what's going on globally and how it was in desperate need of a 10% correction. Well it looks like that correction may now be under way (fingers crossed) and… we're all set!

Last Wednesday we reviewed three ETF's that are short the S&P 500, and all three are looking fantastic right now… and if the correction is indeed under way, all three could return massive gains in the coming weeks.

That 10% correction we're looking for would put the S&P 500 around 1,920. Giving the following ETF's returns of 20-30%... not bad.

First, here's a quick look at the S&P 500 chart year to date:

Look at that strong bend and breakdown since the end part of June. It sure looks like it's ready for the correction.

So once again here's the 3 ETF's to keep an eye on:

Direxion Daily S&P500 Bear 3X ETF (NYSEARCA:SPXS) *The investment seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the performance of the S&P 500® Index.

The fund, under normal circumstances, creates short positions by investing at least 80% of its assets in: futures contracts; options on securities, indices and futures contracts; equity caps, floors and collars; swap agreements; forward contracts; short positions; reverse repurchase agreements; exchange-traded funds ("ETFs"); and other financial instruments that, in combination, provide inverse leveraged and unleveraged exposure to the S&P 500® Index ("index"). The fund is non-diversified.

ProShares Trust - ProShares UltraPro Short S&P500 (SPXU) *The investment seeks daily investment results that correspond to three times the inverse (-3x) of the daily performance of the S&P 500®. The fund invests in derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as three times the inverse (-3x) of the daily return of the index.

The index is a measure of large-cap U.S. stock market performance. It is a float-adjusted, market capitalization-weighted index of 500 U.S. operating companies and real estate investment trusts selected through a mechanical process. The fund is non-diversified.

ProShares UltraShort S&P500 (NYSEARCA:SDS) *The investment seeks daily investment results that correspond to two times the inverse (-2x) of the daily performance of the S&P 500. The fund invests in derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as two times the inverse (-2x) of the daily return of the index.

The index is a measure of large-cap U.S. stock market performance. It is a float-adjusted, market capitalization-weighted index of 500 U.S. operating companies and real estate investment trusts selected through a mechanical process. The fund is non-diversified.

All three charts show a strong breakout occurring in the past few sessions. Should the S&P 500 continue lower to its 10% correction value, the returns on these could be great!

Keep a close eye on them, however. Since they're each leveraged at least 2X short the S&P, there could be some wild swings as the market bounces and dips.

Next week, we're going to have a look at some of that cheap Chinese junk. With the bloodletting occurring right now in Beijing, there could be some great discounts over there (and here as well in Oil, as crude went to the outhouse when it heard China's stock market was in shambles).

"As senior rooster 'round here, it's my duty, and my pleasure, to instruct junior roosters in the ancient art of roostery" -Foghorn Leghorn

Here's to good investing…

AJ Caesar

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