More Calls For a Crash (DIA, QQQQ, SPY, NBG, GLD)

We are getting more and more caution from technicians and fundamental analysts that bring back the notion and fears of another market correction.  Some are expecting far worse than just a correction.  The good news is that many of these seem almost implausible, short of the Great Recession coming back even stronger and getting far worse.  Some history does not ever get repeated, but those who choose to ignore history often doom themselves to repeat history.

The newest concern is from our affiliate Adam Hewison of INO, who has given us some great calls on gold up when it was close to $900 and then on calling for a NASDAQ pullback a couple weeks ago.  He now has a new audio-video comparing the DJIA in 2010 to 1929.  This is interesting, and it is also alarming.

The good news is that you can plan or protect yourself.  On Monday I did an article at OptionsZone.com showing some of the basics with actual trade examples behind hedging against a crash or even getting greedy and betting on a crash.  These include real options trades from DIAMONDS Trust (NYSE: DIA), SPDRs (NYSE: SPY), and PowerShares QQQ (NASDAQ: QQQQ).

This time the problems may not come from the United States after years and years of credit bubbles, over-inflated real estate assets, crazy loans and securitizations, and no real risk monitoring.  There are dozens of issues right now.  China has put the brakes on its bank lending.  The Eurozone is now dealing with major sovereign debt and credit issues from Greece, Spain, and Portugal; and throw in Ireland and Italy to boot.  China and US relations are strained.  The issues in the U.s. are ballooning deficit spending coupled with a massive $1.9 trillion debt limit increase, then coupled with policies that are another huge risk to the economy.  Breaking up the banks could have ongoing consequences, and on.  And to boot, stocks decoupled from real forward valuations because the return of a bull market went from last March until the start of January. The list goes on and on.

We have seen the caution from Robert Prechter of Elliott Wave calling for the next wave of the bear market, and both he and George Soros called gold a bubble.  There we followed the SPDR Gold Shares (NYSE: GLD).  And then also on Monday we saw Dennis Gartman, of The Gartman Letter, calling for far worse than a 10% correction.

If you believe that Greece is going down or will get saved, I noted yesterday at VSInvestor.com how the ADR of National Bank of Greece SA (NYSE: NBG) has become the new trader proxy for betting on Greece and the emerging Euro plays.

There is a rule in trading and investing.  That is that hoping and praying, at least alone, are two absolutely awful strategies.  You can be bullish and still protect yourself.  You can be bearish and capitalize off this.  Regardless, there are ways to prepare just in case.

JON C. OGG