Within the U.S. market, only one of the major indices went up in value today–the Nasdaq–but the reality is that this doesn’t even matter. For all intents and purposes, this index had a very rough day, and just because the end result was slightly in the positive does not mean that the Nasdaq is in a healthy state. It’s value really only went up by 0.09 percent, and this is a small enough number to chalk up the end result to random chance. Let’s look at the other two indices to figure out just what is going on right now in the U.S. stock market, and Looking to Become a Trader can do to take advantage of it.
As you might know, the Dow Jones Industrial Average and the S&P 500 are both very close to their highest points ever right now. This in itself might seem like a cause for alarm, but by itself it’s not. Even if these indices were much higher, if the market warranted it, it would be all right. But there is a reason why these indices are valued so highly right now, and sadly, it’s not because the economy as a whole is in good shape. It’s because certain sectors of the economy are in such good shape that within the guises of an index, they are masking how poorly the rest of the economy is doing. For example, financials and insurance stocks are very hot right now, while things that rely upon discretionary spending are not doing well at all. This is another symptom of the top-heavy economy that became so apparent in the economic crash of 2008.
It should now be clear that when the financial sector is not doing well, then the major indices that are supported by them do not do well, either. Today, Goldman Sachs (GS) had a rough performance and dropped by exactly 2.00 percent. This alone isn’t a huge deal, but when more than one major bank falls significantly in value, it can have a big impact on the economy as a whole. Goldman Sachs is a member of the Dow, and this likely was one of the main reasons why this index ended up falling by 0.39 percent today.
Citigroup also had a poor day, and their stock ended up falling over 4.3 percent. This financial stock is not a Dow stock, but it does have connections with some Nasdaq indices. The wary investor will see very plainly how precarious the Nasdaq position actually is right now. If a major performer like this can leave a so-so impression upon the market with only an indirect influence, then what would happen when the effects are more direct? The end result could be pretty bad for the markets.
All of this is to say that the financial markets alone cannot support an entire index, let alone the entire stock market.Trading the Conditions, you need to examine why. And if you see that the conditions are pretty precarious, you need to proceed with caution. Short term options might not be affected right away, but they will be eventually. And the bigger the jump you have on these things, the better your trading can be when things start to correct themselves and market prices reflect true values. It’s actually a tough situation for those traders that look at longer term options. There’s really no way to time this with any sort of perfection. It is fairly certain to happen, but just how soon it will happen is very unclear. A one week or one month binary option might be fine going with the current up trend, but there’s no way to know with precision as of right now. A correction could happen any time.