If an investor sits in cash during this period it may be funny for him watching this volatile market bouncing up and down like the squirrel in Ice Age: The melt down. This morning the market went down almost another 250 points and at the end it surged up to end up 410 points on large volume. One day I would like to see what is behind such volatility. Is this day-traders’ work only? Are they shorting stocks in the morning just to turn their positions into long in the afternoon? The Securities and Exchange Commission issued new rules to stop naked shorting of stocks (naked short trade is when a trader sells a stock without borrowing it from the broker which causes unlimited stock short trading) so financial stocks couldn’t be shorted. So how come that traders and investors can create such a volatile market? Is it a morning panic replaced with afternoon’s optimism? Aren’t those investors and traders experienced enough to avoid such crazy trading?
Well if an investor hasn’t sold positions, the only thing we can do now is to wait what next days and weeks bring us. I am not doing any action unless prices touch my stop loss orders. This market can be also considered as a rally attempt, however when you look at the chart below, there is still no sign of changing the direction. On Friday it still can continue down and it can easily touch the 10,000 point level. So sit tight, wait, and do not open any new positions.
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