A heads up to novice traders!
So far the trend in SPY is intact. However, one is ignorant if they do not see how this market is running on fume. With lower number of 52wks high and week momentum, it is not hard to predict that the drawn trend line is becoming more fragile every time it gets hit.
I don't have a crystal ball, (if I had one I would make everyone I know super rich), however it is not hard to predict that odds of spy holding this trend is much less than last time. I think the case for "buying the deep" is drying up here, the move is becoming riskier.
Right now I am only buying stocks that have great fundamentals and are already crushed and I am doing so in a very conservative manner, tinny portions! Today, the bounce back in the market was due to hedge funds moving to value stocks and I believe deep buyers buying up tech, as of right now there is no case for buying into tech fundamentally.
My suggestion is, that if you are holding on to any stocks that you are not sure about, try to get rid of it. I am only holding to the stocks that I am willing to hold for a long time. I am not trading in this market rather holding on to my long term investments. Also I highly suggest those who are barrowing money to trade to close their positions. Remember if you are 50% in margin for every dollar pull back in your portfolio you will lose 2 dollars of your own money! I know people who wiped their accounts this way. The bigger draw back in this case is that you will lose your buying power.
Here is how:
Lets say you have 25K of your own money and you have another 25K worth of stocks in margin. Your portfolio goes down 20% overall or about 10K. Your capital will reduce to 15K and your margin at 50% will be reduced to 15K. Now not only you are 10K under in your capital, but you also have lost 20K worth of buying power! This is 40% reduction in your buying power, which makes making it back 40% harder not 20%!
Again as always, what spy is doing is useless to most of people unless you are trading the ETF, it is just an indication that were the market overall is heading to. Also I am not a financial advisor so what I am talking about here is just a suggestion. Keep in mind that there are lots of people out there that make variety of claims about stock market, however at the end of the day you are responsible for the trades you do! No one out there compensate you if they are wrong! So take every advice and make your own conclusions!
Good luck!
I don't have a crystal ball, (if I had one I would make everyone I know super rich), however it is not hard to predict that odds of spy holding this trend is much less than last time. I think the case for "buying the deep" is drying up here, the move is becoming riskier.
Right now I am only buying stocks that have great fundamentals and are already crushed and I am doing so in a very conservative manner, tinny portions! Today, the bounce back in the market was due to hedge funds moving to value stocks and I believe deep buyers buying up tech, as of right now there is no case for buying into tech fundamentally.
My suggestion is, that if you are holding on to any stocks that you are not sure about, try to get rid of it. I am only holding to the stocks that I am willing to hold for a long time. I am not trading in this market rather holding on to my long term investments. Also I highly suggest those who are barrowing money to trade to close their positions. Remember if you are 50% in margin for every dollar pull back in your portfolio you will lose 2 dollars of your own money! I know people who wiped their accounts this way. The bigger draw back in this case is that you will lose your buying power.
Here is how:
Lets say you have 25K of your own money and you have another 25K worth of stocks in margin. Your portfolio goes down 20% overall or about 10K. Your capital will reduce to 15K and your margin at 50% will be reduced to 15K. Now not only you are 10K under in your capital, but you also have lost 20K worth of buying power! This is 40% reduction in your buying power, which makes making it back 40% harder not 20%!
Again as always, what spy is doing is useless to most of people unless you are trading the ETF, it is just an indication that were the market overall is heading to. Also I am not a financial advisor so what I am talking about here is just a suggestion. Keep in mind that there are lots of people out there that make variety of claims about stock market, however at the end of the day you are responsible for the trades you do! No one out there compensate you if they are wrong! So take every advice and make your own conclusions!
Good luck!
Not a Financial Advise, I may have an open position in this underlying.
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