Waves Of Selling Pound Markets

2020-03-16 | Simpler Trading Team

Bad news seemed to come in waves on Monday along with frantic selling as the markets cratered to low levels not seen since 1987.

The Dow closed down just shy of a 13% drop with a loss of 2,997 points. The Nasdaq followed suit down more than 12%, losing 970 points, while the S&P 500 finished down at 11.98% for a 324 point drop.

Monday opened ominously as the market crashed 7% and triggered an automatic “circuit breaker” halt to trading for 15 minutes. Opening trading followed a Fed interest rate drop on Sunday that sent overnight futures into a freefall.

A midday recovery Monday of almost half the morning loss was followed by extreme selling through the president’s afternoon press conference and into the close.

President Trump tried to calm fears, but acknowledged the coronavirus pandemic may extend for months and possibly push the economy into recession.

Simpler Trading moderators credited the extreme drop to liquidating funds as traders had to account for margin calls. The market could turn to the upside if liquidation was done, but the question remains as to how much liquidation is yet to be completed.

Expectations are still that this market will continue to erode before any significant return to “normal.”

Under these extreme conditions, there is no cowardice in cautiously maintaining position size and staying out of the volatility.

Simpler’s traders are 100% in cash positions or staying close to that with limited intraday trades. Traders are wary of overnight positions.

There is no rule in trading that says you have to be in the market when it opens limit down. The bottom is yet to be determined and Simpler’s traders want to be in a position to act and not react.

We Saw: crushing losses in frantic selling — 

  • The bear is awake and roaring
  • Fed trying to step in and failing
  • Calls for calm from on high being ignored

We’re Watching: … what happens overnight —

  • How markets react to coronavirus plans
  • For any stock that shows stability
  • Our accounts to stay flat and in cash

Can you make gains with “boring” trades in a volatile market? Find low-risk trades in any market HERE.