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Thursday, May 20, 2010

Fear in the Markets ...

The story isn't the Euro and the United States Dollar (EUR/USD). at the moment. Well ... to be truthful ... the EUR/USD is one story. But the real story at this exact moment, is the United States Dollar and the Japanese Yen (USD/JPY). Not for a short on that cross. I don't trade Forex. But I am aware of the message that it sends.

I said it on the Facebook page, and I'll say it here ... The USD/JPY is showing real fear in the markets right now. A very similar setup before the last "son of 87" of May 6, 2010 - it's real ... and it's fear. It's not computers. It's not "high frequency trading". It's fear. I'm not saying we'll have a repeat of May the 6th. But I am saying that there is true fear out there, and it's being represented in the currencies and credit markets.

Good lord, I'm looking at Crude Oil as I type this out. Down another $2.00.

The equities markets are down from their tops a few weeks ago ... what? Almost 9% thus far from tops? Airelon's Market Tactics dividend portfolio ... the long term buy and hold dividend bearing stocks... ... it's up about 2% since the downturn. And subscribers know why.

I wasn't yelling out "VIOLATED" and all in a blather-panic in the twitter stream yesterday when the 200 period EMA was violated by two ticks (unlike some fear monger bloggers), I had simply a very satisfied annoucement of "hedged" ...

July 100 SPY Puts.

I'm not sure where we're going from here. No one does. But I sure do know when it's time to buy some insurance on long term buy and hold stuff. It was two days ago. I was only smart enough to buy mine yesterday. I think it was Tim Sykes who made this statement originally, but some days I feel the same way:

"It's like I'm Forest Gump'ing my way to success"

:)

As I said ... I'm not 'yet' thinking we're in a "son of 87'" scenario. In fact, the USD/JPY may ease up a bit. I don't usually watch CNBC and I'm not watching it at the moment, but I would imagine they aren't showing pictures of fires and riots this time. Crashes don't usually happen after new lows. What usually happens after new lows, is the market eases up a bit. But I sure know what message that's sending out there, and that the time to be hedged was two days ago ...

And this sure as shootin' aint the result of "High Frequency Trading" or computers.

Edit: 11:12 am - just taken out of the hedge Puts with profit. More cash to play with on the dividend investing route.

Edit: 3:07 pm - I hope ones remember what I had said about what I mean when I say: "Wow, look at that rally" as opposed to "Wow, look at that fear". Opportunities are arising ... but it will take patience

Edit: 4:07 pm - We've closed. A couple of comments from some very smart people I track during the day. I'd have to agree with their sentiments ...

"i don't remember an uglier close in at least 2 years. Glad to see all the negative tweets and fear in the market. UGLY - Close on the lows ... In my opinion, today was MUCH worse than the "Flash crash" because no reversal - good heavy panicked selling volume though" - Dasan

"Not a good close. it could leave a mark ... some Hedge Fund buds have been aggressively de-risking (h8 that word) this past week, similar in fashion to fall 08. i expect to see ugly #'s" - Morgan_03

It's all fun and games, until you add in fundamental selling.

Is a small rebound in the works? Will we sell off lower on Friday? I don't know ... and I don't care. I do know that "V" shaped recoveries in the markets do not happen. I'm just thankful that I have enough cash for that time when it's time to go on a 'buying spree' for cheap, cash heavy, dividend bearing stocks.

* * *

Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 14 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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