Will there be a “double dip” recession or not? 

As part of my reading this week I came across an interesting article, the essence of which I would like to pass on to you here.  The writer had been watching the performance of three critical sectors which in recent weeks had sold off quite sharply and are all pretty much resting on support price levels.  These are indices of the housebuilders, financials and USO, the oil ETF.  The idea was that these were the markets that led up, topped out and were the catalyst behind the wider sell off that hit the markets in late 2008.  They were among the first to bounce and rally since March 2009 and are now potentially in a position to lead the market into a further decline. 

Well, this is a fair hypothesis as these are the most sensitive of the market sectors at this time.  The super loose monetary policy adopted worldwide in the last year has distorted the picture but when a sell off comes, I agree that these are the sectors to watch for weakness.   

As far as the STPro portfolio markets are concerned, its not going to make a great deal of difference, in fact, probably we will do better if there is a ‘double-dip recession’.  This is because the sell off in commodities and forex markets I trade are sensitive to worries about economic growth and will sell off quite sharply – far more than we have seen already this week, and that would just be for starters. 

If however, the economy just chugs along in a sluggish way all year there will be some shorter term trading opportunities on both sides of the market.  This is one reason I have adapted the trading strategy slightly this year to benefit from either scenario.
 

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