Oh By The Way

Europe and the Americas did much worse than the rest of Asia. It makes sense to expect Asia to get smacked overnight although I am not sure what this portends for the US on Wednesday.

11 Comments

  1. I use stops whenever I can but they’re not a panacea. In panics a stock or ETF can blow right through your stop loss order – it isn’t a guarantee you’ll get the price you place the order for.

    Also, you need to reconcile how stops work with your market timing strategy. For example, I got stopped out on several long positions today. All were very profitable trades – great, but now I’m holding a lot more cash than my timing model calls for. If the market gaps up big time tomorrow (which it probably will) I’ll be chasing the market.

    Stops provide automatic discipline which is good thing imo, but if you let stops overide your big picture barometer, you can easily be left holding a ton of cash exactly when you should be buying like a madman.

    I’ll be buying but am watching the 5/75 day moving average of the Russell 3000 and Value Line Arithmetic. The Russell broke below it’s 75d moving average today.

    Reply
  2. I am not a fan of stops. My experience has been that being whipsawed by the trade is greater than the benefits drived.

    With the ProShares short ETFs, stops may be even less worthy of attention.

    I appreciated my modest ProShare insurance policy today. It made a bad day somewhat tolerable.

    Reply
  3. I think this correction was self-fulfilling. It is VERY possible that it will continue ONLY through the first half-hour tomorrow, then be done.

    Here’s why: I haven’t read this anyplace, and maybe I’m way out in left field. But this is the first correction since many, MANY millions of investors got on-line. I think the quick access to trading (no broker), and the Blackberry handheld text device giving the guy in the airport or even Iraq! a chance to trade, and the trading software (day-traders using all these trading programs) and the ease of setting Stop Orders with the on-line brokers, all culminated in a snowballing of sell orders. It grew and grew all day and even seemed to panic about an hour before the closing bell. This is NEW STUFF, this is ‘retail’ instant and programmed access to the trading floor.

    Also, I am reading dozens of financial blogs, and their comments chatroom/forums, and they all contain statements about being Stopped-Out. BUT they ALSO all contain statements about FINALLY getting a chance to buy-in at a “discount”.

    Now we have not only the original huge worldwide liquidity but also the newly-created liquidity seeking a bargain! Much liquidity. That’s soooo bullish.

    This will really be fun tomorrow.

    Reply
  4. Anon 6:05.
    I agree that tomorrow will be fun, but this was not a correction. The market was only down 3.25-3.5% today. I believe that it takes at least a 10% loss in a quarter to be considered a correction.

    But the week is still young ;).

    Reply
  5. I lost 1.8% today vs 3.5% for the S&P 500. It was the same as Vanguard’s balanced index. I knew my allocation was about 60% as risky as the S&P 500. Therefore , today’s outcome was satisfactory from the point of view of risk management. I am some what surprised that all entire world market seem to work in unison, thus international funds don’t offer much diversification. On the other hand, bonds did offer a good counter-balance with stocks as witnessed by today’s selloff.

    Reply
  6. Yes. They say that in the stock market if America sneezes that Europe gets a cold.

    I guess that’s it’s also true now that if even China farts, we have to take a dump.

    Reply
  7. I came home and booted up the computer to find my portfolio down 4.71% on the day. I thought it was an error but refreshed and found it was correct. This is horrible and I am depressed that it took four months to make it and one day to lose it all.

    sadji

    Reply
  8. Easy come–easy go….

    Reply
  9. Bubbles in the world: China (huge bubble), Japanese Yen carry trade (humongous bubble). This is causing indigestion. We simply have to pass the bubbles like any organic being would do. Whether it hurts or whether it is loud and stinky, we gotta do it.
    Oh, there is also a third way.
    Postpone it. Why hurt now when you can hurt more later? Yeah, that’s probably the best solution.

    Reply
  10. Bubble? The market goes down in China (one day) and then here and now it’s a bubble?
    The bubble is about to pop on the use of the term, “bubble”…

    Reply
  11. er..yes, Larry..the bubbles have been going on too long and the bubble is going to pop on the bubble word too. One correction does not define a pop though.
    Help me find a new word please.
    Cheers

    Reply

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Oh By The Way

Europe and the Americas did much worse than the rest of Asia. It makes sense to expect Asia to get smacked overnight although I am not sure what this portends for the US on Wednesday.

Submit a Comment

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