The Financial Markets such as the Dow and Nasdaq lost 128 points, giving the blue chips an eight-day loss of just under 2,400, or 22.1 percent. The only good news is that fact the the SEC allowed short selling to re-enter the market for much needed liquidity.
Several stock and commodity broker don't understand why the SEC just didn't halt trading for the companies that they were affraid would be wrecked. Keeping the billions of dollars of manged money has been the main reason for this panic exiting by mainstreet out of the market.
Going forward into next week investors can expect a much less volatile retreat in the market, and even rallies.
When the short sellers exit the market they have to buy causing short term spikes and rallies similar to what was seen before this major crash.
Commodity Prices have been retreating as speculators sold and shorted the market due to less demand world wide.
Oil has retreated with gold on the rise. gold historically goes higher this time of year though with the up coming indian wedding season as well as the restructuring of fund managers portfoilios before years end.
The return of Shot Selling is a Necessary Action In Trading in all Market Sectors
The ban of short selling limits market liquidity! If you don't allow shot selling, your not allowing the billions of dollars a day from the manged and hedge fund sector that makes up a huge percentage of volume. Short selling is not a long term position hold, and when exiting the market will cause much need spikes and rallies much needed in this free fall. If you leave the direction of the market to individual buyers, your letting everyone down!
With Equities, the share price declines coincided with the lifting of a ban on traders who aim to profit from share price declines. The ban had prevented short selling on nearly 1,000 companies, including financial firms and industrial groups such as GM. The ban was lifted by the US Securities and Exchange Commission late on Wednesday night.
While the ban may have created an initial short squeeze that buttressed financial stocks, traders say hedge funds were then forced to bring down their corresponding long positions in other financial stocks, which created new selling pressure.Weather your a stock or commodity broker today is a good day!
Many market participants believe regulators will be forced to quickly bring back measures similar to the so-called “uptick” rule. The rule, which was scrapped last year, allowed short selling only when the last tick in a stock’s price was positive.
Each week OPTIONMIZER analyzes markets showing opportunities based on volatility. We delve into the volatility analysis of the markets to find trade designs advantageous to options traders. This report provides specific trading strategies to use in select markets based on the OPTIONMIZER volatility analysis.
October 7th, 2008
S&P 500
5 Month Average Implied Volatility = 24.9 Current Estimated Implied Volatility = 37.1
MARKET AND VOLATILITY ANALYSIS: Since the approval of the $700 Billion financial rescue plan by a vote of 263-171, the market has done anything but react favorable. The stock market headed lower to start the week as the potential global slowdown sends investors packing. Bailout aside, at home the evidence of deepening credit concerns and employment meltdown is mounting. With the banking situation the way it is and concerns growing among investors that there could be more to fail, the Fed could look to reduce interest rates shortly. Credit issues are a worldwide problem at this point and until it has been addressed the market does not look to have much potential. As previous reports have indicated the volatility in the S&P has been high but continued to increase. This still seems to be the case. Continue to buy premium to take advantage of the even still increasing volatility that is expected to come.
RECOMMENDATION: Buy short term puts. If these are too expensive implement bear put spreads put on by a qualified commodity broker to help offset the cost. If the market continues to sell off be prepared to scale out of positions.
SOYBEANS
5 Month Average Implied Volatility = 42.5 Current Estimated Implied Volatility = 47.6
MARKET AND VOLATILITY ANALYSIS: Beans are continuing to be harvested in the south as well as Australia. Right now the quality of the soybeans continues to remain an issue. Like most of the commodities soybeans have experienced recent sell off. It appears at this point there is profit taking helping the market continue its move down. The fundamental issues regarding this market seem to be in the shadows at this point. However, China is king right now and they could influence the market based on what direction they go. The volatility in soybeans is high. With the implied volatility above the statistical, premium collection is the proper play. The implied volatility is up 12% from the 5 month average.
RECOMMENDATION: Sell butterfly call spreads as well as call spreads.
SUGAR
5 Month Average Implied Volatility = 38.8 Current Estimated Implied Volatility = 44.3
MARKET AND VOLATILITY ANALYSIS: Sugar has had a substantial sell off over the past week. However, that was stalled today thanks to India deciding to halt exportation due to the low pricing. This caused Asia and Africa to find replacement shipments. The fundamentals in this market seem to be fine, the problem is the strength in the US dollar. The volatility is high right now and it appears that may continue. The sugar market has potential to the downside. The implied volatility is lower than the statistical. In this environment buying premium is recommended. This is due to the expectation of volatility continuing to increase.
RECOMMENDATION: Buy intermediate term puts (March) or if they are too expensive look to purchase bear put spreads for the same time frame.
HEATING OIL
5 Month Average Implied Volatility = 45.9 Current Estimated Implied Volatility = 53.1
MARKET AND VOLATILITY ANALYSIS: Heading into the cold months heating oil is a typically a seasonal buy. Heating oil recently saw its first increase in 5 days. With the expectation that heating costs should increase as much as 25% this year the unknown is the weather. A cold winter could cause increased volatility to the upside. It is clearly shown by the chart below that both the statistical and implied volatility is very high. This jump came after the statistical crossed through the implied in the beginning of September. With the volatility so high and the expectation of prices increasing, look to sell high priced premium options that lose value on bullish moves.
RECOMMENDATION: Collect premium by selling put spreads.
Why a financial firm chooses to expose their operating capital to junk loans is going to be a historic question. But a bigger one will be why our nation decided to support the mistake of these overpaid CEO’s and why we threw cash at them.
Throwing money at the failed firms won’t help Wall Street; Wall Street is made up of nothing more than human nature and speculation. If Wall Street thinks they will make more money going short than long, they’re going short!
The fact is, if this economy wants to rebuild, it has to rebuild fundamentally by itself.It has to flush out all that was wrong and bad and re-build the right way. Only then will a Financial Firm or Bank be a true reflection of itself allowing it to grow healthy and naturally.And guess what, that’s going to happen anyway, it’s just being delayed by temporary news hype and a touchy feely administration via evening news feed.
Any financial advisor that doesn’t have a failed Wall Street insurance to protect your portfolio should be banned by the SEC. Bear Market Funds, SPDR exchange traded funds or Put options on the Stock Indexes from a Futures or Commodity Broker are all ways your adviser can buy insurance for your retirement, rather than saying “sorry, or oh well” when the market crashes. It’s called a “Delta Neutral” position.
As far as the travesty of the crash, it happens with every generation and with every generation it will work itself out, and re-build.
Futures brokers increased bets last week that the euro will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain in the dollar.
This is a testament as to who is running the show, the FUNDS! No problem as long as you get on the same side. Ok, so fundamentals do play a big part in this market. Actually the funds are willing to exit any and all positions based on world event news, if they figures out the energy markets though, it's only a matter of time before they control the dollar. Traders and commodity brokers alike are having to use technical analysis to follow these invisible market movers.
The oil markets are now showing signs of mass long buying positions by the commodity index funds, again! Over the counter swaps are a great way for a behemoth sized funds to run the market in one direction from behind the curtain. The fundamental news about Russia is an excuse used by media writers who wonder why the market decided to go up five dollars today, and not at the beginning of the conflict. This is precisely why we need to stick to the technical charts in this controlled market. The parabolic overlay on top of the daily chart will give a commodity broker or a trader an even playing field with the manipulators. I’m not a hater because of high gas prices. Compared to GDP, gas hasn’t been this affordable in years. I and my clients will make money whether the market goes up or down!
At the pump, retail gas prices continued their decline, suggesting that cash-strapped Americans are still cutting back on their driving. A gallon of regular slipped another penny overnight to a new national average of $3.73, almost 10 percent lower than record prices of $4.114 a gallon reached July 17, according to auto club AAA, the Oil Price Information Service and Wright Express.
Crude began the day lower after Tropical Storm Fay missed oil and gas installation in the Gulf of Mexico, easing concerns about a disruption in supplies. But prices later spiked more than $3 a barrel, apparently driven higher by a surge in heating oil futures that triggered technical buy orders in energy markets, analysts said.
Heating oil futures rose 3.89 cents to settle at $3.1237 a gallon on the Nymex after earlier rising more than 3 percent to $3.1998.
"Crude's just getting pulled up by heating oil. It was a quick pop and technical triggers may have been hit," said Jim Ritterbusch, commodity broker of energy consultancy Ritterbusch and Associates in Galena, Ill.
Also supporting prices Tuesday was a slightly weaker dollar compared to the euro. The 15-nation euro traded at $1.4783, up from $1.4697 late Monday in New York. A falling greenback encourages buying among investors seeking commodities like oil as a hedge against inflation or weakness in the U.S. currency.
Crude's rally came despite the easing threat from Tropical Storm Fay. The sixth named storm of the 2008 Atlantic hurricane season swept over southwest Florida early Tuesday, bringing heavy rain and wind but staying well clear of oil and gas platforms scattered across the Gulf. The storm was moving to the north and was expected to gradually weaken during the day. Fay steamed through the Caribbean over the weekend and was blamed for at least 14 deaths in Haiti and the Dominican Republic.
Royal Dutch Shell PLC said the storm no longer threatened its oil facilities in the Gulf and that it had begun redeploying 425 evacuated workers.
"We dodged a bullet with the storm," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
Some recovery in oil was expected after steep price drops over the past month. Oil prices have shed about $35, or 24 percent, from their all-time trading record $147.27 reached July 11 amid mounting evidence that a cooling global economy and high fuel costs are curtailing demand for energy.
Olivier Jakob of Petromatrix in Switzerland, however, said it was too early to assert that oil prices had reached a bottom, "especially since there is a clear lack of buying momentum."
Regarding oil fundamentals, Jakob said it was worth keeping an eye on how China's import of oil products will develop after the buildup of stocks for the Beijing Olympics. Reports of lower demand there could put further downward pressure on prices.
Meanwhile, Venezuela says it's prepared to propose an oil production cut at the next OPEC meeting if crude prices decline further. Oil Minister Rafael Ramirez said in a statement Tuesday that if prices continue to ease, "Venezuela would have to analyze the possibility of a production cut," a move that would likely send prices higher.
Analysts said uncertainty over the conflict between Russia and Georgia will also support oil pricing. Russia has begun withdrawing troops, but U.S. officials said Moscow has positioned missile launchers in the separatist South Ossetia province.
In other Nymex trading, gasoline prices rose 4.87 cents to settle at $2.639 a gallon, while natural gas futures added 8.8 cents to settle at $7.976 per 1,000 cubic feet. In London, October Brent crude rose $1.31 to settle at $113.25 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
At the pump, retail gas prices continued their decline, suggesting that cash-strapped Americans are still cutting back on their driving. A gallon of regular slipped another penny overnight to a new national average of $3.73, almost 10 percent lower than record prices of $4.114 a gallon reached July 17, according to auto club AAA, the Oil Price Information Service and Wright Express.