Recovering From the Drop in the Stock Market

On Monday the March 9th, 2020, the Dow Jones Industrial Average fell 7.5% within the first 5 min of the market being open. This triggered a stock market halt that was build into the Dow Jones to protect itself from a complete catastrophic crash in a single day.

The market has been certainly taking a massive hit since the drop and investors have quickly adapted their perspectives towards understanding the severity of the situation. All in all there is a great amount of conflicting ideas regarding the current financial status of the market and some feel it is time for some change.

The current version of the circuit breaker rules are included in the U.S. Securities and Exchange Commission’s Rule 80B, which took effect in 2013. They include the following:

  • If the S&P 500 (SNPINDEX:^GSPC) falls 7% from where it started the day, then trading stops for 15 minutes, unless the move occurs after 3:25 p.m. EDT.
  • If the S&P keeps moving lower to a level 13% below where it started the day, then another 15 minute trading halt gets triggered. Again, though, no such halt is imposed if the move comes after 3:25 p.m. EDT.
  • If the S&P falls further to hit a level 20% below its starting point for the day, then trading halts for the remainder of the day.
A person wears a face mask walks along Wall Street after further cases of coronavirus were confirmed in New York, March 6, 2020. Andrew Kelly/Reuters

The EU announced today is that it is revising the current requirements for Airlines to keep their slots at airports for at least 80% of the time. This is aiding the airlines in being able to make very tight and strict slot restrictions that may be missed due to enhanced security checks and adjustments in air traffic through Europe.

Maintaining an Opportunistic Mindset

As the market continues to drop down back to previous levels from 2019 we are seeing how there is a sense of free fall in the market price. Investors need to maintain their goals in mind towards their investments. Having a strong understanding of your trading style may determine the over all success of your investing in these next few weeks.

Investors must look for opportunity. There are certain seasons in the market and understanding the season that we are currently in is key to determine the style of investing that you may be executing on. Just like the farming and agricultural seasons of the year the market tends to follow similar patterns.

During the Spring after the Winter Colds start to warm up we start to see flowers grow and thrive. As temperature rise and flowers begin ready to bloom we can see the April Showers bring may flowers. This time old saying applies also to the market as historically the market tends to turn positively in April after gloomy market condition. With the flowers starting to grow through the dirt it allows for the market to grow.

During the summer there is a bit of slow down as families tend to enjoy the summer days. As more families are off on the beach and enjoying the great weather the tend to look away from the market. This is a great time for the stocks to continue to grow progressively with less volatility in the market from active trading volume.

As we enter the fall time the market is ready for harvest. Many investors are looking for opportunity to close out position and enjoy their growth. The harvest is where we start to see a bit more selling in the market take place as closing out stock positions reduces exposure to risk before the winter months.

Historically speaking we have seen the greatest market downturns occur in the winter months of the year. This is where we see the market to slow down and consolidate as it looks to conserve some energy during the winter months to prepare for next year.

As we end of the winter with a sharp drop in stock prices the opportunist would be looking to see the flower bloom as the climate starts to warm up. With warmer weather condition it reduces the spread of viruses which in turn promotes consumer spending and traveling.

Staying in Control of Emotions

The market can tend to be very volatile to global pressure when it comes to matters that are out of our control. We cannot allow these events to alter our trading mindset. Having a level head when trading the market is essential to remain in control during times of uncertainty and fear in the market.

There are various books available that educate and inform traders on the psychological basics that are essential to be an incredibly stable and successful investor.

Is it well agreed upon that to become a successful investors in the market the key is to develop consistency. Being able to create a strong routine and habit for successful traits that create for positive results begin with developing a strong mentality in the market and not allowing your emotions to interfere with your investing.

As the Airlines have been taking a massive hit over these last few weeks we are going to be closely watching these next few weeks to see some gain of optimism. With so many stocks now trading much lower than their 52 week highs this creates for an opportunity for investors to enter high value stocks at low prices.

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Disclosures
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf

Air Market Group content is provided solely by Air Market Group LLC and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. Air Market Group, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Air Market Group is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. Air Market Group is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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