This situation is SIMPLE. You have your list of short stocks in your rake. If the market opens down, you enter your positions on the open (shorts). You cover the losers and add to the winners, monitoring the market all day long. If the pullbacks (rallies) in this potential down day are on anemic volume, you do not lighten your positions during the day. In fact, with the buying power you recoup by cutting your losses, you add to your shorts on these anemic rallies. This is how you make money now. If the market rallies on real volume, you may have to cover it all. The other posibility is that the market will bounce up. So then if it opens up, you woudln't be in the shorts in the first place, except for the few stocks in your rake that are relative weak compared to the overall market. These are good low risk entries with small scale ins, but most of the time they are marginal trades. However, if the market opens up and then sinks on high volume, then those initial trades can pay of handsomely as you add to the positions. Of course, scale out of the winner maybe 1/2 position at a reasonable support for shorts. This keeps your sharp. The best traders do this in some form. It also gives you more bullets to fire when the short pulls back and you re-enter. Am I shocked I have been short heavy since August? No. even on up days there were major profits in daytrading short positions. Now shorting is more difficult because we have lots of traders shorting and covering, but it's still profitable. I am pleasantly surprised at the number of 'traders' here that bemoan market declines. For those of you doing that, do you really feel you are in tune with the market if you are fighting the powerful moves, instead of joining them, influencing them, and profiting from them? Use the intensity of the "bad" news to make yourselves happy. Take the money from the market that IS there, right now. In rallies and crashes there is potential for massive profit. Don't let the losses scare you if you can trade another day. Remember, TRADERS embrace powerful change, price volatility and are able to harness the energy of the market for their own good. Are you a trader?
cramer, kudlow and vince ferrell (sp) are so far below the waves that it will take a glass bottom submarine to search for their long positions.... Ferrell six months ago said that financials "look attractive".....
S2007S said: With due respect, S2007S, no one here is begging Ben or any one to cut rate. If we know for a fact there will be no cut and the DOW will collapse. We simply sell our long positions and turn around and short everything we can lay our hands to short, and every one will be OK. The market does not work that way. No one is begging or hoping for one possibility or another. We are trying to make an educated guess what will happen, guess right we will be doing OK, guess it wrong, whether you are short or long, you are fried. My guess is we are leaning towards the possibility of a surprise rate cut. They can't afford to sit and allow the market to collapse, leading to a deep recession.
a slideshow of market recations over the world http://www.nytimes.com/slideshow/2008/01/21/business/0121-STOX_index.html
A stock market collapse would not cause a recession. But a recession may cause a stock market collapse. There will be no rate cut tomorrow because Bernanke does not want people to think he is trying to manage stock market returns.
Just an observation When sentiment is universally 'negative' as it is now.. perhaps the markets will do the opposite again?