With so much fears and volatility in the market, I'm not even going to bother on trading individual stocks. What I know is the market is unwinding and it is going down, what I don't know is how low will it go and how it will get to the bottom (the low could be somewhere in the 2002-2003 low, we won't know until the market get there.) Therefore, by buying the ultra short ETF on SP500, Nasdaq 100 and the Russel 2000, SDS, QID, TWM respectively, I will ride the trend without having to worry about the directional move of any individual stock and avoid the opening gap risk.
In addition, as the global economy is being dragged into a global recession by the credit crisis, demand destruction for oil will bring the price of oil back down to the level where it begun to run toward the speculative $150 per barrel, and that level is in the $65 range. Since the price for a barrel of oil exceeded $120, the daily US consumption has decreased by 1 million barrels a day. With the anticipation of the price for a barrel of oil to go below $80, I will buy the ultra short ETF, DUG.
As the world central banks and the Fed are pumping enormous amount of liquidity into the financial market in an attempt to solve the credit crisis. these moves will cause tremendous inflationary pressure for the future. With the panicky investors seeking safe haven along with the inflationary pressure that will come due to the expansion of liquidity by running the currency printing presses, the price of gold will move upward. To profit from the upward movement of the price of gold, I will buy the gold ETF, GLD.
