The Perfect Short Squeeze. Scare the heck out of everyone with stories/rumors of default from Europe (some real, some not), dry up liquidity which they did mid-day as spreads on all assets were widening throughout the afternoon, and then drop of a story of China coming to the rescue thereby crushing all the speculators who were piling into ^VXX^, ^FAZ^, and any other leveraged bet that the world was coming to an end.
That’s how markets work on days like yesterday. It’s not the first time and it will definitely not be the last.
The markets today remain oversold and hypersensitive to any type of news (true or untrue). The path of safety remains to stay in high cash positions (most of you who are trading with The Machine already are) and until the market becomes extremely overbought, we’ll sit quietly protecting our cash.
The above is from Larry Connors’ Daily Battle Plan.
To learn more about the Daily Battle Plan – including access to Larry’s daily ETF trading signals, click here for more information.
And for more on ETF trading, be sure to visit us here to check out the book that Stocks, Futures and Options (SFO) Magazine called one of the best trading books of 2009: High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading.
Larry Connors is founder and CEO of TradingMarkets.com.