It is interesting to see so many spread traders sitting out of the latest market turmoil. That is why the markets become so volatile. We keep getting 2 to 3 sharp up days followed by 2 to 3 sharp down days. I'm prepared to spread bet on a short-term basis and accept that in this scenario there are plenty of potential opportunities as we talking 5 percent swings, but after next 3rd down day, can we really say with any degree of trading probability that the market won't fall another 3 percent on the 4th? The markets are behaving very much like what happened in October 2008.
Are we in for a Stock Market Waterfall-Type Crash?
And I currently believe that a massive stock market waterfall-type crash in the indexes is very possible by year end. So I will risk the capital as a hedge against that #1 asset that does not vest until January 1, 2011, while at the same time possibly benefit from this potential scenario.
Even if there is no crash by year end, I still believe that we are currently seeing the tracing out of the 2nd shoulder of 'Head and Shoulders' formations all over the place, and the imminent sell-off and subsequent bear market should be significant.
I think the overwhelming negatives that exist today: the disintegration of the Euro; the coming sovereign defaults in Western Europe and devolving of the European Union; the coming failed 'recovery' in the U.S. as the effect of the stimulus peters out; the coming collapse in housing and further collapse in commercial real estate; the continuing massive unemployment; the worsening debt-to-GDP ratio to historical 'state-killing' levels; and the geo-political unrest from all of this as well as the worsening middle-east and possibly Korean peninsula crisis brought about in large part by a weak, even anti-American President, simply overwhelm any bullish scenario for ANY asset.
I believe even gold will sell off in the coming deflationary collapse, and then will turn around and go parabolic to reflect the hyper-inflation that will come as the government attempts to print its way out of the hole. I may be way off, but that's how I see it and the way I feel I have to play it.
David Forey is an independent trader specializing in short-to medium-term technical strategies. He is the founder of http://www.spreadbettingportal.com, a website dedicated to free spreadbetting trader education and discussion.
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