Stock Ideas 
Stock Ideas Investors Daily Edge This Market is Nuts!
Stock Ideas Investors Daily Edge This Market is Nuts! 
Market Watch
| A few weeks ago, I wrote an article that discussed the government's plan to help distressed borrowers affected by the subprime mess. This comes as the housing market sees foreclosures increase at an incredibly rapid pace. | |
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| This Market is Nuts! |
| Monday, 13 August 2007 | ||||||||
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I have been studying, trading, and working in the investment industry for 20 years now, and I have never seen a market like the one we are in right now. It is absolutely insane. Let me give you a recap of the past six says of trading. Since the press likes to use the Dow as a market barometer, I will use that as our gauge. Starting on Friday, August 4, the Dow dropped 284 points and the S&P took out its 200-day moving average. The following Monday, the Dow gained back every point of Friday’s decline, as it climbed, you guessed it, 284 points. Tuesday was guaranteed to be volatile with the FOMC decision due out at 2:15. It didn’t disappoint. The Dow was chugging along with a gain of approximately 30 points when the Fed came out with its decision, which, in case you were in a cave somewhere, was no change in the rate (big shock). The market immediately dropped approximately 150 points over the next 20 minutes, but then reversed and closed 34 points higher.
Wednesday may take the cake. The market moved higher from the opening bell and the Dow was up almost 200 points at 2:30. Then a rumor started circulating that Goldman Sachs had scheduled a news conference after the closing bell. Over the next hour, the Dow dropped 210 points. Goldman Sachs contacted CNBC and said that there was no truth to the rumorand the market proceeded to rally from -15 points to close the day higher by 153 points.Let me recap this - up 200 points to down 15 points to up 153 points in an hour and a half. I know I mentioned at the beginning of the summer that I expected more volatility in the markets, but I didn’t expect it to be minute-by-minute volatility. Thursday, the madness continued as the market got a scare out of the gate with French bank BNP Paribas freezing three of its funds that invested in sub-prime mortgages here in the States due to liquidity issues. That sent the market reeling 200 points out of the gate. After attempting to bounce back, the Dow closed down 387 points with 100 points being given up in the last hour. I like to break market participants into three categories: traders, speculators, and investors. Traders are the ones who want to be in a trade anywhere from a few hours to a few days at most. Speculators are looking to be in a trade anywhere from a few days to a few months at most. Investors are looking to be in trades for months or even years. I bring this up because I have come to a conclusion about this market. Due to the wild swings, this market is made for traders and investors. Traders can take advantage of the wild swings if they are on the right side of the swing. Investors that are looking to enter long-term positions can do it at a much lower price than they could have a few weeks ago, at least on most stocks. My preferred investment style is that of a speculator. And these swings are maddening. Unless you time the entry and exit perfectly, it is tough to stick with a position. So I have to make a choice - stay out of the market or change my style to shorter term or longer term. I haven’t decided yet, but I do know one thing. The market isn’t going to change for me, so I am the one who has to adapt. Good luck and good trading, Rick P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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