S&P 500 Faces Worst Slump Since 2009 And A Crash Trader Who Profits From These Slumps!
Recent concerns that the global economy may relapse into yet another recession is driving stock prices down as most investors are dumping stocks and moving into the relative security of US Treasuries, Swiss Franc and Yen. There are worries that the FED may yet again start a new stimulus package. Swiss Central Bank is making an effort to curb the Franc gains while the Japanese Central Bank is selling Yen.
Businessweek.com reported that S&P 500 crash turned into a 11% rout since July 22. S&P 500 moved 4.8 percentage points between the intraday high and low on August 4th. This was the widest since the flash crash of May 6, 2010 that lasted for 20 minutes. This 4.8 percentage point range erased $862 billion from the value of US shares before prices rebounded. The two year Treasury yields slumped to a record low on fears that the US economy was weakening.
The Dow Jones Industrial Average swung in a 416 point range before closing up 0.5%. The Dow Jones Industrial Average (DJIA) ended with a gain of 60.93 points at 11,444.61 while the Standard & Poor’s 500 Index lost 0.1 percent to an eight-month low of 1,199.38. It slid 7.2 percent over five days, its worst weekly drop since November 2008 as reported by Businessweek.com.
Analysts have compared the two S&P 500 crashes. The one that happened on May 6th, 2010 and the most recent one that took place on August 4th 2011. Most were of the opinion that both the crashes were very different. The last year crash was more volatile with more volume while the crash that took place a few days back was more orderly. The market opened lowered and it grinded lower all day on August 4th 2011.
Almost 850 securities triggered the short sale circuit breakers. These circuit breakers were triggered when these 850 stocks lost 10% from their closing price yesterday. Greg Roy, a Market Crash Trader says that the market has changed. Volatility is the real new level in the stock market and the most predictable side of that volatility is the downside. Greg Roy has called and played every major crash of the last 25 years since 1987s Black Monday including dozens of minor crashes. He’s notorious for calling the 2008 stock market crash 4 months before it hit. Greg says: “ The giant opportunity facing investor today is on the short side of the market.”