I know its a little early to be discussing strategy for next week but since I am going to be implementing it today itself, I thought I would share it with you readers early too. Getting right to it, here is what I intend to do:
(1) Move fully to cash before the close today.
(2) Stick to day trades until the FED QE2 announcement is out i.e. November 3.
The reasoning for the above is pretty simple. I am taking the same approach to QE2 news that I am take to earnings season. As the regular readers of this blog know, I don't like to hold a stock, no matter how confident I am about it, through its earnings as I believe that holding a stock through its earnings is akin to gambling. Same goes for QE2 announcement. What is the amount in play going to be? What is the number needed to make the market happy? How many billions of dollars worth of easing has the market only factored in? Even if the announcement seems very positive, is it going to be sell on news? Or is the market just going to rip higher?
I have only one answer to all the above questions: I don't have a clue. Hence the need to shift in cash. The run from 1040 to 1180 has been great for me, and I am sure for most of you readers too and I believe its the time to cash out on those gains. Sure, the market might rip higher and I might miss out on some sweet gains, but the risk of holding through the announcement just doesn't appeal to me.
Take care and good luck!