Selling into the Weekend

market crash tradersWell, it seems that investors are smarter than I thought. Despite a very good employment report (almost 300,000 new jobs created, excluding census workers), markets still sold off going into close on Friday to make it the worst week for the Dow since 2008. After opening up in the red, the Dow actually bounced back and even saw some green, however, sold off to end the day down 139 points. Due to markets opening up in the red and not in the green as I had anticipated, I waited until we rebounded back to almost green until I picked up some short positions (FAZ, VXX, and SDS). I then sold out of these positions before close as to not get caught with our usual green Mondays.

More speculation about whether it was indeed a "fat finger" error that triggered the mass selling yesterday caused for investors to remain unsettled on Friday. Now, many analysts are saying exactly what I said in my post yesterday as an explanation of what caused yesterday's market crash. Due to more modern, computer regulated trading practices, a domino effect can quickly come into effect, especially when markets are uneasy with an international debt crisis. Authorities are still looking into the "exact" reason of what may have caused it, but unless they get real creative, I don't think they're going to pinpoint a singular event.

Back in the old days, during similar types of crisis's, market traders would just not answer the phone to make buy/sell orders. In a sense, this is the same type of response. The selling triggered computer sell positions all over the world, which would most likely explain why many were having problems placing trades on their computer platforms yesterday. I, myself, am not fooled to think that yesterday was a fluke and that we can expect to return to business as usual on Monday. Today's negative trading, despite a very positive employment report, proves otherwise. So, active traders, be on your guard, because I have a feeling the next few weeks are going to be very interesting. If you are needing to open a trading account, I think is offering a monthly free trade promotion. Worth checking out.

VXX continues to move strong, being up another 12% today. Now yes, this ETN will get hammered on a big rebound day, which is why I am trading it with a lot of turnover and very tight stop losses. However, it has moved up close to 60% in just a few days. With the always concern of Monday being a green day, I had to exit out a lot of this position, with some stop losses on what remains.

It will be interesting to see what news comes out over the weekend to either help or hurt our current situation. Remember, just as how devastating to markets this Greece debt crisis is, an unseen solution, if it were to be announced, would most likely bring a lot of confidence back to Wall Street. We have seen in times past that the IMF and US government are willing to do just about whatever it takes. This why it is always dangerous trading around these influencing variable events.

I do, however, remain pretty confident in a re-tracement regardless of the outcome of Greece. We had been way overbought for a while now, even with the trillions of government stimulus that has now reached our economy, we are only seeing minor steps to growth, which is I'm sure, much less than the government was anticipating. We cannot rule out the possibility of a double dip for this recession, as it is very common to see happen in these types of economic environments. Now that the problems are extending globally, the US government and The Fed are starting to lose control and the man behind the curtain is being revealed. Let's see what next week brings. Happy Trading.


  1. Anonymous Says:

    Look for smallcap stocks to rebound the most as MANY of them were oversold by 25%+ in the matter of 2 days on this downward correction (manipulation). I like the research and selections at for this sector. Plaing the VIX ETF is not a bad idea here as well.


    Nothing like a great weekend.