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Neal,
Is Joe forecasting a financial
panic? It seems so to me, but it is not clear. Perhaps you can clarify in
25 words or less.
Thanks,Norman
<BLOCKQUOTE
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Neal Hughes
To: <A
href="mailto:realtraders@xxxxxxxxxxxxxxx";
title=realtraders@xxxxxxxxxxxxxxx>realtraders@xxxxxxxxxxxxxxx
Sent: Thursday, September 13, 2001 6:55
AM
Subject: [RT] Danger - trading when the
market re-opens
FYI..> This posting by Joe DiNapoli is being
sent free to our entire > list since many of you may have use for this
information. We know > some of you may not be able to update your
client page renewal > before markets open. We are swamped here with
subscription > requests which are processed manually. These requests
will be > completed as soon as we can. Please do not respond to this by
> email. Put any responses on our client pages here. > <A
href="http://www.fibtrader.com/proprietary.html"; eudora="autourl"><FONT
color=#0000ff>http://www.fibtrader.com/proprietary.html
> > Events of Sept 11 > > Contributors to these
pages may have died yesterday. My Family > lives in Boston and my niece
was scheduled to board the flight > that struck the south tower. She
didn't make the flight but her > coworker did. As a frequent world
traveler on an American > passport I'm keenly aware of the risks. I was
under death threats > when I spoke on financial matters in a
predominately Muslim > country several years ago to a studious,
attentive, and friendly > group who were also predominately Muslim.
Since the weapon of > choice is typically knives in that country, I
lined my chest and > stomach area with the morning paper, bunching it
securely under > my belt. It was a uncomfortable presentation. >
> Our hearts go out to all those directly or indirectly effected. I
> guess that's all of us. My hope is that we learn more from this
> horrific event than the knee jerk reaction of retribution. In my
> view, it's a bit more complicated than a group of fanatics >
attacking freedom. > > Trading after a disaster > How can
we handle extreme emotion in financial markets? Please > re-read the
disclaimer liberally pasted throughout our web-site > and literature.
I'll give you my best shot at this but there are > no guarantees in
situations like these. > > I was around in the days of $50
silver, 60 in the Bonds, and some > of you know I predicted the 500
point down day in the DOW in 87. > While this brings experience to the
table it does not mean what I > will say below is going to be right.
It's just my best shot. > > The fact that the markets are closed
for a few days is a very > good thing. It allows the planners (Fed,
market makers, > specialists, and exchange officials) to plan and
emotions to cool. > > Firstly, If you don't have to trade, or
you have insufficient > experience, don't trade. > > Your
biggest problem in situations like these is the getting the > fill.
Regardless of the accuracy of our approach, in times like > these, you
have to get the fill to make or preserve capital. > > You'll
likely be ruled to death by the exchanges on any of these > markets. If
you don't know what I'm talking about see one > example of this in an
article I wrote entitled: Where is my fill > !!(X'd trades) (originally
published in Stocks and Commodities > Magazine) which is available free
on the website. > Usually it's in our Proprietary client area but we've
temporarily > made it available free on the following link. > <A
href="http://www.fibnodes.com/xd_trade.html"; eudora="autourl"><FONT
color=#0000ff>http://www.fibnodes.com/xd_trade.html >
> Difficulty in getting your fill will be proportional with the
> panic in the market or lack thereof. > > Futures pit
issues: > Along with X'd or canceled trades mentioned above there's the
> "up-tic rule". Now I'm simplifying this for brevity but the >
bottom line is that if prices keep falling without an up-tic > you're
not "due a fill" as a seller… > Even with a market order. Those
standing in the pit will be the > ones that are able to sell when bids
come in. They will be sure > there won't be an up tic until sufficient
support is apparent, > usually at a very major fib number like the ones
we've been > talking about for the past year and a half! > Your
sell orders will then be filled at the bottom when they want > to buy
(from you). > > Then there's fast market rules which basically
say they can do > about anything they want down there with your order.
You can make > money one way for sure, bet with someone crazy enough to
take the > bet that whatever the specialist, floor trader, etc. do with
> your order, it will not be in your financial best interest. >
You'll win the bet but you'll lose on the fill. > > Electronic
trading: > Depending on the panic or lack thereof, this is a big test
for > the electronic trading computers and I don't know how it will
> come out. I do know that those Electronic trading agreements >
we've all signed are not designed to protect us. Re-read them. I >
would not count on being treated much better in that medium than > any
other. > > NYSE: > Anyone selling on the 500point down
day in 87 was filled at > 500points down even if they sold when the
market was only 100 points down. > "Orderly market" mandates do not
mandate specialists to loose > billions in a day getting you your
fill-- If you sell in a vacuum > you are at their mercy. > Most
of you are aware of the up-tic rules when going net short on stocks. >
> > NASDAQ: > Again, those trading in 87 know how market
makers treated the > public. Yes there have been rule changes but if it
comes to Major > market makers loosing billions or you getting your
fill, guess > who'll be the looser. > > ECNs will be
available to NASDAQ market makers to lay off orders, > so the ECNs may
not be a haven either. You need a bid to get a fill! > > Perhaps
the Fed or something else has given guarantees or some > such thing to
large entities or institutions to keep things > orderly. I don't know
but I would guess they have. > > Lets take 3 orders-- in a
market we'll call "WAFTT index" (Where > Angels Fear To Tread). The
situation may vary depending on the > market you trade but the outcome
will likely be the same. > > 1)You're a short seller initiating
a position at market. The > market last is 20,000. Your filled 10000
lower, at the low, since > there's no up-tic. > The market
closes 5000 up from the low. You were right, the > market is off 5000,
but… you Lose! > > 2)You're a buyer initiating a position in
WAFTT, at the market > you're immediately filled at 19999. The market
trades 9999 > lower --you're sold out of your position by your broker
for > insufficient margin, at the low, a market maker, or local, or
> specialist takes your sell, he's up 5000 and you're in deficit.
> > > 3) You're closing an existing short position at a
pre determined > DiNapoli profit Objective-- It's a perfect play, WAFTT
cover the > short at 10,003. The market goes through your buy point by
a few > points. But you didn't get the fill --fast market, X'd trade,
or > the order matching computer broke or was overloaded. You can't
> get reporting on your trade as the exchange is too busy and you
> don't know until that evening when the market closed that you
> did not get filled. Or perhaps you've > re-sold, Thinking you
were flat, on a bounce and now you're > short 2 times the position and
the market is 5000 off the lows. > Called higher tomorrow. There are
many miserable scenarios and > yes I'm simplifying possible events but
these are real possibilities. > > So what do you do?… >
If you don't have to trade, or you have insufficient experience, >
don't trade. > Don't sell or buy into a vacuum. Wait for retracements
and place > your orders so price action is apt to move significantly
through > your pre-calculated price points to better ensure your chance
of > getting that fill. > Record any conversations with brokers.
Time stamp all orders! > If you trade electronically have back up phone
numbers. Have back > up local numbers as well as 800 numbers. Have an
automatic dialer!! > > Major fib levels should hold--Look for
Confluence and Agreement > to trade against and trade small in case a
position goes against > you, so you can hold on to it until you get a
retracement back in > your direction. > > If your
retirement accounts are low on equities as we have > repeatedly advised
since November of 99, now may be the time to > get some great stocks,
but only at major fib numbers- In the past > weeks I have posted some
of those key numbers on our proprietary > client web pages for the
indexes. It's easy for you to calculate > them on your favorite stocks.
Forget value investing-- P/E > ratios and such. Put your orders in
ahead of time-- Bonsai in as > described in the book Trading With
DiNapoli Levels" and hold on > to your lunch. It could be wild ride!!
> > If you feel this would be of value to anyone feel free to
pass it along. > > -Joe DiNapoli. > <A
href="http://www.fibtrader.com/"; eudora="autourl"><FONT
color=#0000ff>http://www.fibtrader.com > >
> PS. This message is ONLY being sent to traders who have >
joined our email list or requested information from > our web pages in
the past. We NEVER spam, we hate SPAM! > Reply with a subject of REMOVE
to be deleted from our > email lists. We do not make our member's
addresses > available to anyone. >
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