NYSE has unveiled some new measures that are designed to help its failing markets. What it boils down to is that the Chinese government is urging companies and execs to buy up as many stocks as possible, promising them credit if needed. And while the Chinese economy is very different than Western markets and this might work, to the rest of the world, this was a pretty lackluster move. It set up a poor beginning to the day that ended up getting even worse as the day progressed.
This is a very short term measure. Besides the obvious flaws to the plan (what happens if the Chinese government doesn’t extend that credit offer at the right time? What if companies simply decide not to buy up shares?), this only temporarily boosts prices, and it only does it in portions of the economy.
Smaller companies will not have the same buying power, and it could harm these companies more than help them. If it works at all, the help will only be for a few days or weeks at the most. Foreign looking traders need to stay out of China until some sort of stability is reached. Right now, it’s far too unpredictable to risk any sort of cash here as it is purely speculation at this point.
The rest of the world has not responded positively to this yet. Before the opening of U.S. markets on Wednesday, futures for all three of the major indices were down at least 1 percent. Once the markets opened for the day, trading was short lived, too. A computer glitch then halted trading for more than three hours on the New York Stock Exchange. Despite the shorter trading day, real time market prices followed suit with futures. The S&P 500 fell by over 1.6 percent, the Dow fell by 1.4, and the NASDAQ fell by 1.7 percent. It was a rough day by any standard, but the situation leading up to the early closing in China certainly did not help U.S. stocks. By the time the market opened back up, there was less than an hour left in the trading day.
Preliminary reports say that the problem was an internal configuration issue, and nothing malicious. Trading was suspended not because of risk of a breach, but because officials wished to avoid any further complications that would hamper any trades made during computer repairs. Even though it wasn’t a major issue, it was enough to spark concern. Couple that with the issues with the Chinese stock market and the Greece debt crisis, and a perfect storm for big drops was created. Issues like this do happen once in a while–it happened to the NASDAQ about two years ago–but it’s never pleasant and always creates speculation about what’s really happening.
There is a silver lining here. U.S. stocks are poised to go up after the smoke clears from the technical glitch. It might take a few days before enough data comes out to identify and fix the problem. Assuming that the problem isn’t intrinsic within the market itself (which is very unlikely), there’s a good chance that there will be a rebound. Hopping on a series of call binary options when this happens will be a smart choice, especially if you time them well with the available technical indicators to try and reduce your incorrect trades. Even if you are only making 75 percent profits per trade, ten $100 trades ends up making you $750. If you are focusing on 5 minute trades for the S&P 500 index, this can easily be accomplished in less than two hours.