On Wall Street, House Doesn't Always Win

risky stock marketI thought this picture would be appropriate as more and more I feel like I am in Vegas when I am playing in this stock market. Considering the equities with highest trading volume are the 3x leveraged funds and very volatile financial stocks, it is clear that we are swimming in a market full of day-traders. This is not necessarily a bad thing, it just can joggle things up a bit, especially when tracking fundamentals and technicals. At any rate, in such market conditions, it creates a very dangerous playing ground for investors. I urge you to be cautious in your own trading, as volatility is sure to increase, which can leave you with some most devastating results if you choose wrong. Especially with leveraged ETFs.

Even though many times I make "daily trades", I do not consider myself a "day-trader." If I were a day-trader, than on a day like today, I would most likely be pulling my hair out, pleading, "Why me?" However, even though I did suffer losses from yesterday's buys, for me, patience in this market has had an enormous reward.

With the volatility the way it is, it can be very hard to absolutely pinpoint the exact time of change, which is why I have been cautious to guess, but instead wait for the momentum. However, signals and models can give us signs that changes may be near. It is that reason why I value patience with a very high standard. One must be careful though, because too much patience with the leveraged etfs can you leave you a slave to decay.

In the morning it was looking to be the day I was expecting and hoping for as the market was trading down, which was quite good for my FAS Puts and SRS Calls. In fact, I was considering cashing out early when I had reached a 25% gain at one point (my greed). However, during Geithner's address to Congress, we saw the rally begin for the market. The rally got stronger and stronger throughout the day, with minor pullbacks, but ending the Dow up 127 points.

Indeed the rally took a small bite of my portfolio, but this is once again why my earlier rounds of buying are "lighter." Throughout the day, I was able to pick up more SRS calls at lower prices, slowly increasing my investment amount. Considering tomorrow is an unknown for me and, in my opinion, a critical day in deciding the short term fate of this rally, I made some long moves to help ease the pain if indeed buying continues. I bought some FAS, short term call options to play the other side. Economic indicators are pointing to sell for me, but day traders are still wanting to buy. This way, if we do see another strong up day tomorrow, my losses will be minimal, compared to if I were naked. If we go down eventually, which I expect, then I will think of my FAS purchases as an insurance premium and sell them. Sure, it takes a bit of Vegas out of my trading, but also gives me some defense as well.

Apple announces earnings tomorrow, which I believe should be strong as they always seem to do. Apple is one company I actually believe should do reasonably throughout the crisis. They have masterly positioned themselves in their market and no competitor comes close to their products. I believe this comes after close, but an anticipation run up could bring some more green to NASDAQ. A short on QID could be a good play for the next two days.

The worst thing for me tomorrow is that I will be absent from trading most of the day due to a wedding. It seems that sometimes priorities fall on most critical trading days. I will be active on my mobile, but most of my plays will be early morning.

Housing data gets reported this week which may move the markets a bit. Foreclosures have put new worries in the residential market as inventories are sure to soar. In addition to that, having unemployment being one of the biggest contributors to home delinquency, the foreclosures look to only get worse. That coupled with upcoming bank stress tests and the big GM Bankruptcy question is still out there to pull down the market. We were kept under 8000 today, which does provide a small signal of a possibility of a turn around.

I launched The Crash Market Stocks Forum today, as I felt this could be another added bonus in building the CMS community. The chat will remain, but also refer to the Forum for more lengthier content. Also, I found another site much like Lending Club. They're called Pertuity Direct and their slogan is: Learn About Social Lending Invest in people. Earn returns. Do something good while making your money work harder. These social lending platforms have become more interesting to me to invest in, as with the increase of frozen lending, this may be the best source for lower financed debt opportunity. Have a great evening, Happy Trading.


  1. James T Says:

    I totally agree. We're bound to be going down...Futures are down right now and Im hoping for some flying in my shorts, Keep up the good work.

  2. Anonymous Says:

    please consider renaming the site Crash Market Leveraged ETF's

    Huge appreciation for options comments....anyone not trading options should really check out the previous "options 101" posts


    not a day trader...really? mobile trading at a wedding...hmmm

  3. Finance Fanatic Says:

    Good point, good wedding and good day of trading

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