The Uptick Rule
Posted: April 10th, 2009 | Author: admin | Filed under: Uncategorized | Tags: Market Timing, Market Timing Strategies, Market Timing Strategy | No Comments »In an effort to finally get off my ass. I am just going to start posting to the website. It is my sincere hope that you can do better with my trading signals than I am. I have a tendency to over analyze my own trading signals and it usually ends up costing me money. Case in point I managed to buy the SSO (Proshares Ultra S&P 500 ETF) on March 4, 2009. Unfortunately, anticipating a pullback, I sold some of my position on March 13. I am still waiting for that pullback. I refuse to chase this market higher.
If you would like to see something interesting look at this chart.
On July 6, 2007 The SEC abolished the Uptick Rule. The Uptick Rule said essentially you could only sell a stock short if the last tick was an uptick. This would make it difficult to sell a stock short into a falling market. The stock market peaked only 3% above the close of July 6, 2007.
On March 10, 2009 the SEC announced they were considering the reinstatement of the Uptick Rule, and the market has risen 19% from the close that day.
It would be impossible to determine how much of the stock market decline can be attributed to the abolishment of the Uptick Rule. My personal feeling is when the SEC abolished the Uptick Rule the short sellers started foaming at the mouth. As soon as the market started going in their direction, they started shorting anything and everything exasperating the move. The volatility in the market last fall is something I have not seen in 20 years of trading. Frankly I hope I never have to see it again. Sure somebody made money and some will find a way to justify all that happened. But when the stability of the foundation that holds the market together comes into question, enough is enough.
Please do not misunderstand me. I am not saying that the market decline was brought on by the abolishment of the uptick rule. That was started by the bursting of the housing bubble. What I am saying is the SEC’s timing could not have been worse. I also believe that the abolishment was directly responsible for the extreme volatility we witnessed.
