Time to be very careful

[hanna]

Today the DOW was down 999 points. This could mark a turn of the markets in a big way. Even if it was an error, things like this will loose confidence for investors of all kinds!

Should investors panic or bail out? I'm wondering what the effect would be to investors' money because of what happened.

[Finance Globe]

It depends on your risk tolerance. Some people are wondering if this is a buying opportunity, and some are hoping that we can rally to give them a chance to sell, while others are out right selling no matter what the price is.

I think the problem is that investors lost trust in the entire system. From extremely bullish to a total meltdown in days. That smells funny to me as well.

Really, I believe that cash is the only thing to hold right now, at least until we can find evidence of a support level in the markets. I'm not seeing that now. These are dangerous times to put money to work. Sure there are buy signals for certain stocks, but those signals seem to be changing constantly. Volatility creates panic. Look at WYNN, it beat earnings huge Friday, but was still down nearly 5%.

The dust will settle sooner or later, but until that happens, I am not building a portfolio unless I get a chance to buy at extreme levels and use a stop loss. It feels like a casino, not true investment. That spells danger.

[julienne]

What happened just proves that if there's not a lot of human interaction with the system, there will always be a time that it can get away -- out of control. I think that's one thing that can be expected with automation. Or is it?

[Finance Globe]

Hi Julienne,

I'm a programmer myself, and I can tell you that computer programs are only as smart as the programmer that wrote the code. There are certainly flaws in the system, a system that many investors are loosing faith in.

Computer programs use analytical data that they compute and execute steps based on that data. They lack the human gift of common sense and detailed knowledge of decision making. Yes, this was a situation that ran out of control, but I don't think that computers are to blame for all of it. I'm fairly confident that traders panicked when we broke our upper trend-line support level on the markets and caused a trigger of a massive wave of selling, a big domino effect. Look up "protective stop" for more information on that.

I really hope that new laws come out from this, and people learn from this in a big way.

[Finance Globe]

Down, down, down. When does it stop? 1001 on the S&P 500 is starting to seem real. That's about another 2% down from the current opening level. We may see even more than that, but we are in an official correction area, and getting closer to a bear market once again.

Buying opportunity? It could be, but the truth is that most stocks and indexes have lost their 200 daily moving average and trendline support. Not good signs. 1044 on the S&P is the next critical support level. This number is different by a few points than what you see on CNBC and our homepage. So around 1048 on that number.

Be careful!

[hanna]

I think the problem is that investors lost trust in the entire system. From extremely bullish to a total meltdown in days. That smells funny to me as well.

If I was in their shoes, I'd also lose trust in the system. I'd think something fishy's going on if the change occur almost without warning. If something's going to turn bad or good, we gotta see some warning signs or a trend before seeing the effect, right?

[Wanderer]

Frankly, I am in favor of reinventing the Glass-Steagall Act of 1933 which prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. It was designed to control speculation.

We have seen the arrogance of those large institutions on Wall Street and their lack of care for the regular folks. In front of the US Congress they are afronted to even be there and to be questioned. Of course, they have millions of dollars and could care less about the people or the system.

GREED! This is what I see the whole Wall Street mess is about. We are NOT better off for it. I am afraid that enough life has passed by me that I see reforms and "...it will never happen again..." Yeah right!!!

Unfortunately history is blind and repeats itself!!! The "Depression" of the 1930's didn't occur to our present day folks??? Well my editorial is over

[Finance Globe]

I agree with your post Wanderer.

Once again, I am in defense mode and I will probably stay there unless something big happens that is actually good.

ETF's such as TZA and SDS should be in play now. Let's see how they do by November. I would expect at least a double or possible triple (or more) within the next 5 months. Especially TZA, since it's a 3X bear ETF for the stocks that climb and fall the fastest in my opinion.

Current prices:

TZA: $6.42
SDS: $32.42

One thing you will have to know is that leveraged ETF's decay. Meaning that up movements on short funds lose permanent value. So, you can instead short the SPY (S&P 500) or individual risky stocks like MGM, RVI or LZB. These are all speculative stock plays that have all shot up from $1 to $10 or more on average. They will be quick to go down, and if we are heading down, you want to re-think your portfolio if you're holding them.

I am not recommending doing this, I am just stating this is what I'm doing, and once again, reiterating my original post, "It's time to be very careful"...

Mike

[Finance Globe]

After today, with terrible news... The market was capable of staying a little green. I am expecting consolidation by the big funds for the next few sessions before a big move. The Philly Fed Survey and new jobless claims was terrible today, but the move today and tomorrow is likely to be from options expiration. You cannot read into the way the markets trade on these days. Overall, I am looking for a downward move in the markets for the next several months.

[hanna]

Frankly, I am in favor of reinventing the Glass-Steagall Act of 1933 which prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. It was designed to control speculation.

We have seen the arrogance of those large institutions on Wall Street and their lack of care for the regular folks. In front of the US Congress they are afronted to even be there and to be questioned. Of course, they have millions of dollars and could care less about the people or the system.

GREED! This is what I see the whole Wall Street mess is about. We are NOT better off for it. I am afraid that enough life has passed by me that I see reforms and "...it will never happen again..." Yeah right!!!

Unfortunately history is blind and repeats itself!!! The "Depression" of the 1930's didn't occur to our present day folks??? Well my editorial is over

Very well said Wanderer.

[Finance Globe]

It looks like a more friendly time for the markets is coming. I am expecting a 2-3 week uptrend and then more selling into the end of the year. At this point, I would lock in profits in TZA and SDS. I am now in UNP at 73.65 and PCL at 34.05.

[Finance Globe]

It sure feels good when you're right about this insane stock market! As long as PCL holds 35.25, I will likely add more. 37.00 would be the next resistance level. The target for PCL is yet to be determined.

UNP is now a bit over-extended, so I took the trade off at 75.86 and will likely add on pull-backs later. Looking at the low 80's for UNP.

[Wanderer]

It sure feels good when you're right about this insane stock market! As long as PCL holds 35.25, I will likely add more. 37.00 would be the next resistance level. The target for PCL is yet to be determined.

UNP is now a bit over-extended, so I took the trade off at 75.86 and will likely add on pull-backs later. Looking at the low 80's for UNP.

Yep...! And I am chasing bonds and making money (have to watch). Move dollars around every so often depending on the market. Precious Metals is going crazy and I am making good money on this. Mining is still moving...! All of this is NOT for the beginner without some guidance. FG and the Wanderer have been at this for awhile so we sometimes hang on the limb... and hope!

[Finance Globe]

FG and the Wanderer have been at this for awhile so we sometimes hang on the limb... and hope!

Hope is necessary, and that is part of it unfortunately. However, investors have to use good risk management, and only buy when there are good set-ups and using a stop-loss (a stop loss sells when a security reaches a certain point, limiting losses).

On a side note, there are way too many bears trying to bring the markets down, so be very careful shorting anything right now.

[Finance Globe]

Very good action, crushing the bears/shorts once again. I am flat now, and will wait for a pull-back before buying long. PCL off at 35.52.