Holy Cow!!! Market Manipulation? More On Trailing Stops!!!
Posted by admin on May 6th, 2010
Today was definitely a crazy day with the stock market. The Dow was down almost 1,000 points at one point today. It ultimately closed down 347 points or 3.2%. I really think there is some sort of market manipulation going on. Several stocks traded down to $0 or pennies from it! Some of these include Boston Beer (SAM), Exelon Corp (EXC), CenterPoint Energy (CNP), Eagle Materials (EXP), Genpact (G), Brown and Brown (BRO), and Casey’s General Stores (CASY).
This sudden drop that happened today is the #1 reason why I have written at great lengths in the past as to why you should NEVER physically input stop loss or trailing stop loss orders. If you had input this such order for Boston Beer, for example, at a level of 10% below yesterday’s closing price, it could have blown right through this and actually sold your shares at near $0! So, never physically input a stop loss/stop limit order; but, rather, keep it in a spreadsheet or notebook or something else for quick viewing.
So, how did this happen? It’s complete crap in my opinion. Apparently, someone at Citigroup mistakenly typed a “B” for billion instead of an “M” for million on a trade. If this is true, that person better have been fired on the spot and the company fined big time. You can read more about it here.
Also, this is why I despise computer driven trading platforms at many of these hedge funds. It creates an unlevel playing field for retail versus institutional investors. For example, it will take a few to several minutes for you or me to input 5 trading orders. These same 5 orders plus a 10,000 more will take microseconds for these computer trading platforms to execute. It creates unnecessary volatility in the markets and decreases the confidence that folks, such as you and I, have in the markets. There needs to be legislation passed to prevent this or even eliminate these algorithm/computer driven platforms being used at many trading firms.
I would be interested in hearing your thoughts. Definitely, a frustrating day for many of us.
On a positive note, if you did buy EUO and some form of gold and/or silver since I have been recommending them over the past year, you are sitting on some nice profits. For example, EUO is up almost 25% since end of December 2009, which is when I started recommending it. Don’t be shy to take some profits off the table as nobody has ever gone broke taking a profit. With that said, I expect EUO to rise more over the near term and long term as the Euro should continue to break down due to continued troubles in Greece and inevitable problems to surface at other EU (European Union) member nations, such as Spain and Portugal.
As always, if you have any questions, don’t hesitate to post a comment or email me directly at customerservice@yajnikletter.com.
-Samir
May 6th, 2010 at 3:09 pm
Can also consider close only stops to avoid these types of blips.
Great day for a trader!
May 6th, 2010 at 6:04 pm
Yes, that’s an alternative unless, of course, there is a precipitous drop after hours. It’s best to not physically input stops and rather keep track of them offline. There are some online services that can be used to do this. I would consider what happened today to be more than a blip and something that will be investigated with potential fines or penalties to be handed out. Not sure how many traders made out since the time frame it took to go from being 300-400 points down to being 989 points down to then being back to 300-400 points down was such a short period. Some people made out but many more were unable to capitalize. I wouldn’t be surprised if a few or a lot of hedge funds got royally smacked in the face today due to their trades being placed via computer algorithms.