Investors, traders and even institutions are feeling pain today after the markets collapsed for the second day in a row. Just days after the media proclaimed all was perfect in the world once more, poor economic news ripped the markets from China and the massive bailout of Greece may fall apart. The S&P 500 has fallen over 5% in the last two trading days. Just today, the SPDR S&P 500 ETF (AMEX:SPY) is trading at $122.00, -6.60 (-5.13%).
This is a classic joke of a market. This market is run by greed and fear, pushed to extremes by instutions, the Federal Reserve and governments. It catches the smallest investors off guard and takes their money every time. If you do not know how to swing trade it, you will lose money. This type of market is a simple transfer of wealth from the have-no-clues to the in-the-knows. If you have no clue, then you better step up and start getting a clue.
It is all a rigged game. It is as simple as that. With the media following like a lost puppy, the market is pumped to extremes, high enough to coax the little investor in, then flushed to take their money.
There are simple keys to remember in order to avoid losing money. First, use your head. Logic is the best tool when trading. The market had soared 20% in less than one month. Logic should dictate a pull back no matter how hard the media is pumping. The second key is to avoid listening to the media. Stations like CNBC are there to make money. They make money by selling advertising. Therefore, they must cheerlead the market at highs and scare you at the lows. The little investor usually follows the media because they cannot control their emotions. This is a recipe for disaster. Lastly, start learning the technical chart patterns. If you had looked at the chart last Thursday, you could have easily seen that the market had filled a key gap, and never confirmed above the 200ma.
There were many other keys that alerted intelligent investors and traders to the drop. InTheMoneyStocks members nailed it by being short the Euro, copper and long SDS, which is a 2x short S&P 500 ETF.