Hey Folks, I hope for those of you in the path of Hurricane Irene you are all safe and sound.
For our Pre-Market Traders our next session is scheduled for Tuesday at 7:30 AM provided we have power in our offices. I am not anticipating any issues. I’ve had a number of you inquiring about our newly initiated PMT sessions as well as our one on one coaching sessions…feel free to contact me at my email address or at my Skype ID and I will respond as quickly as I can.
Trade Smart — Not Often
Wow!!…what a smack down we got today in the financial markets!
The Dow, which last week lost 698 points, nearly matched that drop in a single session with today’s action marking its worst day since late 2008.
Clearly the S&P Downgrade was the catalyst for today’s move, but not the primary reason. The downgrade simply highlights the fact that the US has debt problems…the primary reason for market weakness I feel is that most investors are simply re-pricing their risk models and portfolios to take into account a slowdown in global growth….
As I have always said before and will continue to harp on today, the markets always overcorrect, both to the upside and the downside…the question here is how far will the markets fall before a reactionary move up occurs…
The Dow fell 634.76 points, or 5.6%, to 10,809.85, its first close under 11,000 since October of last year. The daily point and percent loss is the worst for the Dow since Dec. 1, 2008, when the Dow fell 680 points, or 7.7%.
S&P declined 79.92 points, or 6.7%, to 1,119.46, with financial stocks hardest hit among its 10 industry groups.
And the technology-heavy Nasdaq fell a whopping 174.72 points, or 6.9%, to 2,357.69….this was the worst day in percent terms for the Nasdaq and S&P 500 since Dec. 1, 2008.
An interesting stat for those of you that are so inclined is that for every stock that rose, 69 fell on the NYSE, where more than 2.5 billion shares traded. Composite volume topped 9.7 billion.
And let’s not forget the U.S. dollar gained while US Treasuries rallied, with yields on the benchmark 10-year note down to 2.341%.
And how about Commodities? Starting with Gold rallying to close at a record $1,713.20 an ounce, crude-oil futures dropped $5.57 to $81.31 a barrel…
All of this heightens the meeting of the FOMC tomorrow, but keep in mind they are not expected to make any dramatic moves.
For those of you in our Pre-Market Trading sessions we’ve been talking about key support and resistant levels and today should not have come as a surprise…in fact many have been playing the markets as we’ve discussed; -to the downside to really nice profits….
And finally, with the VIX up to very high “fear” levels, keep your stops tight and your position sizes small…or if you don’t feel comfortable playing in these turbulent waters then don’t even get wet….
Trade Smart – Not Often
Folks, after the head fake in yesterday’s markets today we see a continuation of the down trend…this morning during our Pre-Market Trader Session I pointed out how the markets will have a high likely hood of moving down very hard if we take out yesterday’s lows and that is what happened…and over the past few sessions we discussed that you should either be out of the markets or playing the downside as that is the higher probability trade….those taking that advice are enjoying the day…for those of you that are Long securities I have been on my soapbox (again) talking about hedging your position as the trade winds begin to pick up….again, those that are listening have dramatically reduced their portfolio risk….those trading direction neutral trades (Condors, Butterflys, ect) are at substantial risk with volatility rising like it is…not a wise trade in these market conditions!
As I write this post a troubling sign also occurring is that Gold Futures are going down…normally you expect to see Gold and Silver move up as a hedge against market fear, but today’s downward move in Gold tells me many investment firms are probably selling Gold/Silver Future postions to raise cash for their other margined accounts…we saw similar situations occur in late 2007 and 2008 when the markets moved in a downward spiral….keep in mind this will probably be only momentary as I am still longer term bullish gold/silver but now many firms are just trying to raise cash or go to cash….
And speaking of going to cash, reports are coming across the wire where a few larger custodial banks in NYC will begin charging those customers that are increasing their cash balance accounts…many larger corporate accounts and large investment firms I hear are moving out of short-term treasuries and moving into cash, and these custodial banks where these deposits reside have to pay a fee to the FDIC to insure them…so, the banks have sent out statements to their larger customers telling them they will begin to be charged a fee to hold cash in their accounts beyond a threshold level…imagine that!!
Trade Smart — Not Often