Crash Market Stocks - Financial Tips On Making Money In The Stock Market

For many, today was starting to look like the beginning of Armageddon on Wall Street, as around 2pm Eastern Time, markets completely began to crash. At the height of the drop, the Dow had dropped over 8% (over 990 points!). When I saw the numbers come across my computer screen, I had to blink twice. I then went to check two other sites as well as my phone to see if what I was seeing wasn't a glitch. Indeed, it was really happening, however, markets were somehow able to aggressively rebound back and close down just under 350 points. Sure, the final closing is still the largest we've seen in a year, however, it looks much better than a 1000 point down day, which would have been the largest one day decrease in the history of the Dow.

So what happened? Well, that explanation seems to be under debate as we speak. Many sources are claiming the mass selling was triggered by a computer error. Some sources are saying that a trader entered a "b" for billion instead of "m" for million in a trade possibly involving Proctor & Gamble (see trading chart below), a company within the Dow. There is speculation that Citigroup may be the bank that issued the erroneous trade, however, they are claiming that their data matches up and that the trade came from somewhere else. At any rate, the first thing you need to decide is do you really believe this solely caused today's crash?

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Sure, with the evidence of a large increase in selling volume in PG (which is usually a very moderate moving stock), questions should arise. However, can we really believe that someone has access to completely derail the entire US Stock market with the typing of a letter? Really? If this is true, I believe terrorists just found a new weapon for the US. I have a hard time believing that the entire stock market was selling off due to a solo computer glitch. However, this explanation sure does a good job of explaining one of the wildest days of trading and helps to restore some security back in markets. Here's my theory...

Due to over double the volume being traded on the Dow, I believe there is a bit more to the story than just the P & G episode. I do believe that some selling had been initiated by the large drop in PG's price, however, I believe other sellers took over as well. The problem with today's way of trading is that everything has become automated. Sure, it has made stock trading ever so convenient, however, on days like today, it can be a disaster. Hedge funds and institutions around the world are holding positions in the stock market and many times stop losses are placed on them to minimize losses. Well, due to our current, very fragile market at the moment, many of these stop losses have become rather strict and can trigger with just a few percentage loss. With the plunge in the Dow, I am sure many of these automated selling positions were triggered, which in turn ignited the domino effect that we saw today. Do I believe that the government intervened with some help to put an end to the crash, sure, but that's me.

I cannot say today's event was a natural event, however, the gains and losses that were experienced today were as real as they get. In fact, my portfolio had a huge day for the good. The ETN I discussed yesterday, VXX, was at one point, up over 25%. My shorts on SPY and longs on SDS also killed it. My positions in gold were also rewarded. I was able to take a lot of profits in these today, as I felt from the beginning of today's crash, the market was not naturally behaving. I do not want to risk what could be a very big buying day tomorrow, if people all of a sudden feel the need to buy back into their old positions at a discount.

So this complicates tomorrow's trading a bit, which is why I greatly lowered a lot of my short positions today. Tonight, many will most likely be reading the story of the "computer glitch" trading and feel that today was a fluke. Is there really turmoil in Europe that could be a big problem for the US? Sure there is, but the glitch story will definitely take precedence. After reading the story, many may feel that now the market is undervalued (if you could believe that) and feel the need to buy back in fast to take advantage of the glitch. This could spark a rather large buying day tomorrow. On top of that, we have the unemployment news wild card, which if turns out to be positive, could be another log to throw on the rally fire. At any rate, I did not feel like giving back most, if not all, of today's profits.

My personal belief is that markets will open up very strong out of the gates tomorrow. PPT has seemed to be a bit more active on Friday mornings. This combined with some anxious buying, we could be in store for a very strong morning. If that does indeed happen, I plan to take some short positions, as I do believe we will begin to trail off by the end of the day. Investors are becoming more and more cautious about holding stocks over the weekend. However, I dare not hold my short positions over the weekend (I'll cash out before close) as the last 10 Mondays have been in the green. I will be using pretty strict stop losses, so lets see what happens. Happy Trading.
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Wow, well I had a feeling there would be fireworks by the end of this week, but I did not expect this. The Dow was flirting with the -1000 mark earlier and is currently rebounding, trading around the -500 mark. I'm getting reports of computer trading platforms crashing and buy orders not being fulfilled. Turmoil in Greece is spreading to the US and we're seeing it today. I don't see the government letting this market tank like a rock in one day, so I expect to see miraculous rebounds like we just saw or even a temporary ban on shorting. I've already heard of people not being able to buy into short positions right now. Enjoy the fireworks.

After Tuesday's big triple digit loss, bullish investors were hoping for a rebound on Wednesday. However, markets closed on the downside yet once again, having the Dow close down 60 points. For now, the double day downer is rather significant when you consider that, recently, most big down days were immediately followed by big rebound days. That chain was broken today. Now, be on the lookout for a potential rally either tomorrow or Friday, because I do not see this market completely sinking all at once into a stock market crash at this point and here are some reasons why.

Much of today's negativity rooted from more turmoil in Europe. Protests have broken out regarding Greece's monetary dilemma and concerns for Portugal's credit rating are rising. Although there were some positives for the day (S&P earnings upgrades and ADP employment increases) they were muted by the negatives. I do feel that we indeed now have some downward momentum, however, I feel that a slight rebound is due Thursday or Friday. With the optimistic report from today's ADP number, Friday's unemployment report could be rather favorable. If numbers were to come out as a positive surprise to investors, markets would be primed for a strong rally. So I am on the lookout.

As I discussed in yesterday's post, one thing I am tracking closely at this point is the VIX levels. VIX was up nearly 5% today as investor's uncertainty grows. As the VIX does usually contradict the overall market direction and may have some weakness today or tomorrow, here is a nice exchange traded note (ETN) pushing out some rewards for the rising VIX. VXX, the VIX short-term futures ETN, has enjoyed some nice strong gains the past couple gains. For those that feel market uncertainty has a good chance of increasing here in the short term (me), VXX is a great option to consider. Beware, it can move with some volatility, but that can be rewarding on the right side.

Charts for SPY show some good technical trends for a potential pullback. I added some put options as well as bought into some SDS yesterday. Even with a rebound, I feel that these positions should reward me in the next coming weeks. After evaluating what we do during tomorrow's trading day, I may try and pick up some longs to take advantage of a potential rally on Friday. So, we will see how it goes. Happy Trading.

Markets opened up on the extreme downside on Tuesday, which was a day earlier than I expected, nevertheless, this is the May that I have been warning about. Clearly, investors have some concerns as the market has almost hit the -300 point mark for the Dow and is looking to close with the largest one day drop we have seen for a while.

Moving the opposite of stocks today is the VIX level. VIX (the S&P Volatility Index) is currently up 25%, which is an extremely large one day increase. Historically, stocks tend to move the opposite direction the VIX graph does. We saw record setting VIX levels during February of 2009, when the market was at its lowest. Graph trending does not look good for markets at this point and start to look in options for some serious returns, as risk premiums tend to increase with the VIX.

Nobody should be surprised nowadays when the market opens the week in the green. We have now consecutively closed a Monday's trading day in the positive for 3 consecutive months. Call it whatever you may, but the fact is, taking long positions just before close on Fridays is starting to sound like a guarantee return. Today was no different after responding to Friday's big down day by having the Dow close up 143 points. Not too shabby for a Monday.

Just as I figured on Thursday and wrote about, we saw a lot of people close out positions during Friday's trading. For those who took advantage of the selling, saw some good returns by close. Hopefully, you got out before close, as most of those gains were taken away today. This week, all eyes are on unemployment. It is clear that consumers have been much more active the past couple months. You can see that by your neighbors new car or house add-on, no parking spaces at the mall anymore, or the long wait at your favorite restaurant. It is pretty evident that people are out spending. Now the big question is, is this real consumer created income being spent or is it just government money? Is this extra cash that consumers are enjoying because they no longer pay their mortgage? I know a few of those. Friday will help diagnose whether the consumer spending is being backed up by an increase in jobs or if we are all somehow increasing our discretionary income somehow. Expect to see some volatility the closer we come to the announcement, especially starting Wednesday.

I said in post a couple months ago that retail should go for a nice little run in the short term. Indeed we have seen that come to pass. Retail stocks have rebounded substantially, with the help of positive earning reports and the overall market getting a boost. However, I did also give a disclaimer that I felt the boost would be short term and soon become overbought. Well, I believe we are getting closer and closer to that overbought stage. The above video, which was posted by MPTrader.com, discusses the recent movements of retail and gives some graphical evidence of why we should be seeing a correction shortly. It is clear retail is overbought at this point, but that fact alone has not stopped other markets (financials and energy) to continue to go up. However, coupled with some graphical momentum, I would say a soon turn in retail stocks is a pretty good bet.

May has officially begun and we will soon find out whether or not we are in for the usual May decline. Bulls would love to see yet another strong correction opportunity be overcome by even more buying. I do see mid May being a difficult time to keep support levels, even with a positive employment report.

BP continues to have its problems while dealing with clean up with its recent oil spill in the Gulf. Expect their stock to be a dog for the time being, as this kind of press is rarely good for consumer confidence. These situations tend to cause for an overselling of stock at a certain point, so a pick up of some BP in coming weeks could be a good play for a nice quick 5-10% correction as it gets oversold. At any rate, markets may be boring tomorrow but I expect to start seeing some more movement as we get closer to Friday. You may also want to consider just packing carry-ons from this time forward, as airlines have made an estimated $7.8 billion last years just on fees. Maybe you should just rent the skis. Ya, that policy won't be going anywhere for a while. Happy Trading.