Paradigm Market Shift

In August of 2011, we experienced the beginning of a new paradigm in stock market investing. While Americans were appalled by the deadlock in Congress over increasing the debt limit, the stock market began to sink uncontrollably. The smart money suddenly realized how hopeless our economy was becoming. Then, in September and on the first trading day of October, the world started taking note of the Greek debt seriously. These events had a profound effect on the stock market. Fundamentals of individual stocks no longer matter that much. Most stocks now move in tandem with each other depending on the macro view of the world economy.

The best way to make money under the new stock market conditions is to buy leveraged ETFs as long as you can buy them near the bottom. The stock market had a tremendous rally during the first two weeks of October after the first bad trading day of the month. Now, we are technically overbought, and we are not near a bottom for either longs or shorts. TVIX, the double volatility VIX ETF, has fallen to $50 from $100 since the rally began. According to the ECRI and other sources, we still might see a recession. So, dark days are ahead again sometime in the future. When TVIX drops to $30 per share, I will be a buyer. Then, in the coming months when the bad news once more rules the stock market, I expect to make three times my investment as TVIX makes another run at $100 per share.