Do'nt think this is a buy on gap down

Discussion in 'Trading' started by NY_HOOD, Sep 15, 2008.

  1. don't be foolish into believing today is a buy the gap down like it was the past few times. i firmly believe the market bought bad news because they BELIEVED the fed would not let a big bank fail. well today they did just that and Lehman is going under as was Merril Lynch who was saved by bank america. also AIG may go under. this is ugly guys and i would just sit tight and let the market do its thing. i do not think today is a great trading opportunity,it will be messy and its best to do nothing.
  2. Brandonf

    Brandonf ET Sponsor

    I've always hated it that people are told to "buy when there is blood on the street" and so many people seem to think they should. I guess it works on your ego if you hit it, so thats why so many people want to try...oh I can remember Sept 15th, everyone was shitting their pants, but I had the big balls and bought". The problem is that most of the time by doing that your blood ends up being part of the pool on the street. I've never
    stepped in to buy situations like this, and even though I've never had the big balls I've still pulled several million out of the market. Chicken little will always live to eat another day.
  3. amen to that. i think you're right. people want to be the one to say that they had the balls to step in. he's the same guy to say he had the balls to put his life savings on red to play roulette. its a foolish gamble.
  4. if such news hit the market it makes sense to examine if the news is also news to the big players and I doubt it was.
    If you check the credit default swaps of Lehman you can clearly see that Lehman had no chance to survive anyway so I think this news is not really surprising to informed market players and thus my conclusion is to buy this gap. It also makes sense to buy into JPM. The business has to go somewhere.
  5. i think the real story is thte fed letting them go under. also merril being bought out. could merril have gone under as well?
  6. I think its good news they let it go under. This means that the situation of the other banks cannot be so bad. If there would have been the chance of a chain reaction they would have bailed out.
    Also you can see Japan after 1990 that bailing out all sick banks is no solution.
  7. true,but the fed not bailing them out takes away that floor of protection investors in financial stocks had;hence the buy the dip in the financials whenever bad news hit the wires.
  8. Brandonf

    Brandonf ET Sponsor

    I think that the financials to buy are WFC, GS and JPM, in that order.
  9. Correctamundo!

    Nobody knows whether this morning is a time to "fade the gap" or "chase the gap".

    Some will get it right, others wrong. Risk management on EVERY trade is paramount.

  10. you never know anything for certain. There are no 100% trades out there. If you wait for them, you shouldn't trade.
    ES already up more than 20 handles.

    Maybe tomorrow rate cut, who knows.
    #10     Sep 15, 2008