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The markets opened lower and accelerated downward after the bailout plan was announced. Crude closed 5% lower at $37.55/barrel. Gold went higher to trade above $916/ounce. Financials led the markets in the selloff: WFC -14.22%; PRU -16.5%; GS -7.65%; JPM -9.75%. STI opened in the positve territory in the morning but sold off dramatically after the bailout plan was revealed, tumbling more than 27%!! GOOG and BIDU were among the top losers in tech sectors, losing $20.25 (5.35%) and $9.73 (6.92%), respectively.
We rested on our profits made last week and stayed mostly in cash, as VIX stayed in a neutral gear and it was hard to guage how the market was going to react to the bailout plan announcement. VIX jumped today, after the bailout news were released, up almost +7%. Ultrashorts were strong, with SKF adding +18.43% and SRS gaining +17.54%. In our Trade Room, I talked about VIX and the financials, indicating how the market would react to the stimulus plan:
HappyTrading (time stamps are in PST, West Coast time)
VIX
creeping up...
GS
getting weaker...
market
VIX created more room on hourly chart to go higher. not good for the market.
looks like market is going to get weaker...
The market continued lower all day and closed pretty much at the day's low! The Dow was down 381.99 points; SPX lost 42.73 points; Nasdaq slumped 66.83 points:
Most sector ended lower. GDX (gold miners) continued to be affected by the overall market conditions, trading 1.08% lower, even though GLD (gold) went up +2.14%. SLV (silver) was also +2% higher. XLF (financials) led the market down, losing more than 10%; while HGX (housing) slumped 8.33%. USO (oil) lost 4.74% and OIH (oil services) was down 5.05%. FXI (Chinese ADRs) fell 4.92%.
SPX
SPX lost 42.73 points to close at 827.16. It plunged below its daily MAs and below the 850 level once again. The MACD went down.
Nasdaq
Nasdaq dropped 66.83 points to close at 1524.73. It closed below its rising 10-day MA. Its MACD was flat.
The market indices plunged today with the Dow closing below 8000, threatening to start a new leg lower. SPX is also very weak, in danger of testing 800. VIX has risen higher and closed above its daily MAs (not shown here). The next resistance for VIX at 50. We'll see how the market handles that level. The market continues to be range-bound. Tomorrow should be another volatile day as the market fights to hold its support. The ultrashorts are good vehicles to profit from the market's volatility. Since we are in the 2nd week of February, the February options on the ultrashorts have become a little more reasonable. Near-the-money and in-the-money options have decent reward-and-risk ratio. For instance, for SKF, Feb 105 through 145 calls all doubled today!
Good night and HappyTrading! ™
