Last week I posted a blog titled A Major Slowdown?, suggesting that the second attempt at voting through of the bailout package, was too little too late, as other economic events had overtaken those attempts to stabilise the US markets. Yesterday the Reserve Bank of Australia cut official interest rates by a massive 1% and the response from our market was a weak 100 point rally, that just gave away the negative mood swamping the local market.
Overnight the Dow Jones gave away a massive 500 points and that panic selling spread through to our local market today as well as all other Asian markets. Japan's Nikkie lost a whopping 9%, and our local All Ordinaries index lost 5%.
Indonesia's stock market was suspended, and Russia's stock market has also been suspended after a steep slide on it's opening of trading today.
Panic has now well and truly set in across the globe!
Many are now wondering what to do.
With shorting bans being enforced across most stock exchanges profiting from the falls has limited but there still are opportunities out there. Late last month I suggested ASX listed put options as an option. I even provided an example for the crazyjimsmith.com forum members. For those who had followed through back then, they would now be sitting on a 100% gain and be set for further gains as the markets go into a free fall.
For my US based readers I have also managed to find two ETF's that trade inverse to the index's.
ProShares UltraShort Financials (Public, AMEX:SKF) is an inverse traded ETF based on US listed financial stocks. Over the week this ETF has gained over 50% and it is almost a certainty that there will be more gains to be made here. SKF closed at $140.27 yesterday.
Another example is UltraShort Russell2000 ProShares (AMEX:TWM) and again these have already made gains of over 25% over the past week. TWN closed at $104.80 yesterday.
Other than finding opportunities to short the market, the best thing to do right now is to sit on the sidelines and wait for the carnage to end. For the more experienced traders picking off small profits from short term moves will still be possible but the juicy gains will be made from the falls and they are likely to be big.