Futures indicate DOW at -600 points !!!

On Friday, the market closed lower than on Thursday continuing the downtrend. As at Tuesday, 7am Singapore time, the DOW futures is already at minus 600 points with S&P500 futures at minus 60 points. The Asian market suffered a meltdown yesterday. It is likely that the Asian market continues it downtrend. The once invincible Shanghai market is also poised to lose its shine. The China bubble might have been pricked well before the Olympics Games !!

When the market sentiments is this bad, typically there are bargain hunters who would come in to long the market on a very short-term basis (within the day or over a few days). I expect the US market to be very volatile with big swings. We have to be careful just in case a similar hammer candlestick (with long shadow) is formed again (as in Aug 2007 low) . On that day, the market sentiment was very bad, stocks just pushed itself downwards. Then out of the blue, Fed Chairman announced some measures and the market quickly reversed itself. Nevertheless, the market is poised for another beating.

To my fellow traders, in market such as this, certain strategies do not work or difficult to make money. These strategies include Iron Condor and Selling Naked Put. So trade with care.

If the market really believe there is a recession looming in the US and perhaps even in Europe, it is very likely that the energy and commodities stocks which had a good run would also suffer a downtrend. This is due to the expected downfall in demand should the US and Europe is in recession.

Anyway, as I mentioned before, I do not want to be a hero and go against the trend. Until the charts showed a reversal is in play, I will short the market at the appropriate time. The weak sectors remained the same - housing, financials, retail and technology.

- PersianCat (Millionaire-in-progress)