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How speedily time flashes by. It is now more than a year since the stock market posted a important long-term High. It was spotlighted by a very bearish Candlestick pattern, and has been followed all the way down during the decline by a repetition of nearly identical bearish patterns. The financial implosions attending the near-collapse of the total national financial system during the last several weeks, resulting in passage of bailout legislation, drove many investors to a state of great concern about the value of, and prospects for, their hard-earned nest eggs.
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It is terribly unfortunate that so many good people have labored assiduously all their working lives to invest a meaningful sum for retirement, now to be faced with a massive diminution of the worth of their holdings – and the prospect of much worse to come. What is even more unhappily the case is that they have no knowledge of the defensive measures which they could have taken beginning in October 2007, and should be taking now and well into the foreseeable future.
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There is no need to be a “deer in the headlights.” The Candlestick patterns which have emerged during the past several weeks continue to indicate the gravity of this pervasive bear market, and the urgent requirement to take countervailing action so as to defend the value of one’s portfolio.
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There is “insurance” available. It is found in the form of Inverse Stock Index Funds and Inverse Stock Index Exchange-Traded Funds. There are many of them available on the open market, promoted by respected and stable firms. Their stated goal is to increase in value when the particular Index to which they are geared decreases in value. Some of them operate on a one-to-one basis – as an example, a given Exchange-Traded Fund might be so structured as to increase by one dollar in value for every dollar by which the S&P 500 decreases in value. Some of these funds are leveraged, for example on a two-for-one basis.
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I believe that the country is ensnared in a secular bear market which is just now gearing up for a devastating depression I am in favor of the principle that every investor should create and maintain a “Perpetual Short” position, using either an Inverse Stock Mutual Fund or an Inverse Exchange-Traded Fund as the vehicle; and that he or she should be depositing funds into that “insurance plan” consistently, on a regular basis. It is even possible, by so doing, to completely offset the possibility of loss in an investor’s portfolio. Certainly, any degree of offset would be a welcome development. Addtionally, it is possible to make an absolute profit, too.
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Stock and Index prices move in waves, which are clearly visible on price charts. While a ”Constant Short” plan can be of great value in protecting the worth of one’s portfolio, skillful use of Japanese Candlestick technical analysis can also be extremely useful in identifying countertrends to be harvested for gain in upward countertrend corrections. Various methods of technical analysis can also be a boon in identifying the probable end of a countertrend rally and in pointing to a clear-cut opportunity to “pounce on the bounce” for enhanced profit as the market declines.
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