With the transportation index closing seriously in the red today and the Dow trading off it's highs, it looks like this week could be the beginning of a down week. This should present us with some good buying opportunities in the defensive stocks, which benefit the most from volatility, and precious metals. Utilities with stable cash flow and strong balance sheets, as well as mythic consumer staples may be a good place to store some of our cash.
Also, companies that are trading more than 50% below their 52-week highs, and that are seeing increased insider buying (no selling) could make up the best place to put some speculative cash, as their downside is far more limited than in companies experiencing an uptrend at the moment.
With bond yields rising, and given the promise of lower rates and monthly purchases, bond funds may counter-intuitively not be such a bad place to store cash for the short term, both to catch some upside and some distributions at the same time. Buyer beware though - yields will likely be volatile as people move money in and out in accordance with moves made by the Fed. Wait for a dip in bond prices (which means,, wait for yields to increase) and buy on speculation with the idea that you could get wiped out. Only use money you are willing to lose. I bet you never thought anyone would say that about bonds, eh? For Canadians, try GICs for a guaranteed small positive return (which may actually be negative if inflation outpaces CIG rates).
On a side note, I wonder if the markets will begin to react generally to each monthly announcement by the Fed to buy more bonds ... and if this medium of bond purchases by the fed will lead to a market that not only is addicted to the idea of stability through cheap money, but that it will eventually have severely compressed cycles, many lasting not longer than a month. This may not happen tomorrow, but I suspect if the fed bond buying continues for too long, and is considered to be a net of safety for stock market prices (forget employment or real economic indicators), then people will start to catch on and will trade around the fed announcements of monthly stimulus. The result would be incredible volatile, until the markets figure out that the liquidity being pumped into them is utterly useless.
