Trader Mike

There’s some good advice in Alan Farley’s latest article to help “home gamers” (Cramer’s phrase) survive the current extra-volatile market. The whole article is worth reading but here are the four bits of advice:

I have four pieces of cautionary advice for my at-home brethren. Listen up, because it’s no longer a question of whether you want to take real money out of the market, or just add a few bucks to the weekly shopping budget. These remedial steps must be taken if you want to survive long enough to take advantage of the real opportunity.

Wait for the Market Volatility Index (VIX) to drop below 40 and stay there for a week. Massive price swings require equally massive stop …

What can you say after a historic day like today? The indices had some of the worst percentage drops on record today. The Nasdaq 100 was down a whopping 10.5% today, largely thanks to it being heavily weighted to the likes of AAPL (-18%) and GOOG (-11.6%). Much of what I write tonight is going to sound a lot like what I wrote on September 17th. Like that day the fear gauges hit important levels…

I’ll start with the VIX, which spiked as high as 48.40 today before closing at 46.72. MaoXian has a nice chart showing how important VIX readings near 50 have been over the last 20 years (click for the …

“Nobody makes money in a true bear market, not even the bears”
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The action this week got me thinking that I need to write a Duru-like missive on shorting. But since I don’t have a Ph.D you’ll just have to suffer through the following rant which I’ll try to keep relatively short. Yesterday Howard Lindzon wrote:

One thing I have always preached on the blog, less so on Twitter, where I bang out more trading ideas and market thoughts is that shorting stocks is hard. I think it’s harder than any aspect of learning the market. It’s dangerous. Let this …

We had some very interesting action today. The indices averaged about a 2% drop on the back of a much better than expected ISM Services report. That’s not what the bulls want to see. Despite the large percentage drops, only the Nasdaq had an increase in volume. And even that increse only took volume up to the average level. So things may not have been as bad as they looked. The VIX is starting to show a bit of fear, but I think the lack of volume today still shows a lot of complacency.

After yesterday’s super tight range, I started thinking that we were experiencing the calm before the storm. That is to say that low volatility gives way to high volatility. Here’s an article that talks about that very concept by examining the current action in the VIX — A Big Move Is Near — Here’s Why, Part 2