My trading and investment portfolio has taken a significant hit. Much of my experience in profiting from market down turn come from studying recent financial market turmoils (post 2000 era). We just had a fastest downturn ever since 1987.
My methodology in categorizing market crash
-Event driven: sep 11 2001, SARS 2003, approximately 20% or less correction that Will be fully recovered in 3 month. standard V shape recovery
-Economic recession : drag on average 130% correction.
-Financial bubble with debt: up to 50 percent correction within 6-12 months.
The current diagnosis of the market is a event driven type of market crash exacerbated by strong short selling momentum. I have no data to back this except that (Maybe I could find free data on short interest later)
1) I am getting paid a lot more than normal days on short interest earned in lending out my shares.
2) Price action of stocks today behaved a lot like commodities getting naked short-sold in a coordinated manner. Analyst take about fundamental but investors know its the liquidity driving the market. Investors talk about liquidity but traders in the game know the big move just happened because of order book imbalance-much more seller than buyers for a given price range...afterall its the supply and demand of buy-sell order at any given price range that drive the market... If we want to make sense of whats driving the price change.
Action to take: Continue to scale down on aggressiveness (buy less on dips and sell more on rallies to reduce exposure) until U.S. regulators have taken significant actions against short selling. World-wide short selling ban as just started.
My methodology in categorizing market crash
-Event driven: sep 11 2001, SARS 2003, approximately 20% or less correction that Will be fully recovered in 3 month. standard V shape recovery
-Economic recession : drag on average 130% correction.
-Financial bubble with debt: up to 50 percent correction within 6-12 months.
The current diagnosis of the market is a event driven type of market crash exacerbated by strong short selling momentum. I have no data to back this except that (Maybe I could find free data on short interest later)
1) I am getting paid a lot more than normal days on short interest earned in lending out my shares.
2) Price action of stocks today behaved a lot like commodities getting naked short-sold in a coordinated manner. Analyst take about fundamental but investors know its the liquidity driving the market. Investors talk about liquidity but traders in the game know the big move just happened because of order book imbalance-much more seller than buyers for a given price range...afterall its the supply and demand of buy-sell order at any given price range that drive the market... If we want to make sense of whats driving the price change.
Action to take: Continue to scale down on aggressiveness (buy less on dips and sell more on rallies to reduce exposure) until U.S. regulators have taken significant actions against short selling. World-wide short selling ban as just started.
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