If you are not aware of the political debate about the US debt ceiling that has consumed the country, then you’ve more than likely been living in a cave. Our distinguished representatives have debated the possibility of increasing the national debt and solving future deficit problems ad nauseum. Surprise, surprise; we are no closer to a solution with four days until the deadline than we were four months ago. Unfortunately our leadership does not realize the tremendous real life consequences of this political drama.
Aside from the embarrassment of possibly defaulting on our financial obligations as a country for the first time, there is the almost assured downgrade of the national credit rating. This downgrade may well cripple any chance of a recovery in our economy and will have cataclysmic effects in the worldwide equity markets. What does that mean for investors? Any fond memories of 2008?
For traders like me, that would involve shorting the financials, industrials, the dollar index, or anything with interest rate exposure and also hedging myself by buying gold, oil and going long the iPath S&P 500 VIX Short-Term Futures ETN (VXX). But for the average investor, it could mean Financial Armageddon: Part Deux.
Just when the more courageous had sighed in relief at recovering almost everything they had lost in 2008, mother market may just snatch it away again. The weekly chart the S&P has been forming a monsterous head and shoulders pattern. For those of you less apt in technical analysis, the chart below shows the “head” and “shoulders” and the neckline -- the level of support. If that line is broken we may see the S&P fall all the way to 1130.
Click to enlarge
What can you do to protect your portfolio? If you didn’t practice risk management in 2008 it may be wise to give it a go now.
SmartStops has the short-term and long-term stops for the SPY at $128.81 and $127.40.
For more, visit SmartStops.net. Also follow Raghu Gullapalli on Twitter @tradergu.
Aside from the embarrassment of possibly defaulting on our financial obligations as a country for the first time, there is the almost assured downgrade of the national credit rating. This downgrade may well cripple any chance of a recovery in our economy and will have cataclysmic effects in the worldwide equity markets. What does that mean for investors? Any fond memories of 2008?
For traders like me, that would involve shorting the financials, industrials, the dollar index, or anything with interest rate exposure and also hedging myself by buying gold, oil and going long the iPath S&P 500 VIX Short-Term Futures ETN (VXX). But for the average investor, it could mean Financial Armageddon: Part Deux.
Just when the more courageous had sighed in relief at recovering almost everything they had lost in 2008, mother market may just snatch it away again. The weekly chart the S&P has been forming a monsterous head and shoulders pattern. For those of you less apt in technical analysis, the chart below shows the “head” and “shoulders” and the neckline -- the level of support. If that line is broken we may see the S&P fall all the way to 1130.
Click to enlarge
What can you do to protect your portfolio? If you didn’t practice risk management in 2008 it may be wise to give it a go now.
SmartStops has the short-term and long-term stops for the SPY at $128.81 and $127.40.
For more, visit SmartStops.net. Also follow Raghu Gullapalli on Twitter @tradergu.
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