It's times like these when many investors want to head for the hills. And who can blame them?
In less than a month, more than $9 trillion in value was erased from the global markets. It happened as swiftly as the coronavirus appears to be spreading across the globe.
And as I write this, markets are down about 5% in pre-market trading. We've gone from all-time highs into a bear market at record speed.
Flash crashes like this hurt! There's no doubt about that.
But they are actually a lot more common that you might think. Statistics show us that flash crashes -- periods in which market spirals lower creating mass hysteria -- happen almost every single year.
In fact, there's been nine in the past 10 years.
And while the latest flash crash was the quickest drop since the Great Recession, what the panic sellers don't realize is that these events set up massive profit opportunities when stocks rebound.
Before we get to why we might be able to expect a rebound, let's look at where we currently stand.
Below is a chart of SPDR S&P 500 ETF Trust (SPY), which is a proxy for the broader market index. I've marked what I see as the two key support levels.
The first support level is in the $270-$280 area, which as of the market open will be completely breached.
The next support level is not until $258, which is less than 1% below current levels.
Of course, the question now is when the rebound will happen...
What I do know is that the CBOE Volatility Index (VIX) -- also known as the fear index -- is near its highest level since 2008. This means that the market is being driven by fear, not logic. And when markets are being driven by fear, traders must be careful.
So, what's the best way to trade a market like this?
The short answer: With a combination of the strongest stocks -- those most likely to benefit when the market shoots higher -- and a hedge that will protect your portfolio from flash crashes like the one we just experienced.
How do I know a system like this will work?
Well, on Monday, when the S&P 500 tanked 7.6%, this system was up 33.5%. And I expect the hedge will continue to protect us today.
It probably sounds too good to be true -- a system that takes advantage of market rebounds while protecting you on the downside -- but that's exactly what it was designed to do.
Because I feel this system could mean the difference between traders taking massive losses and making massive profits in this market, I hosted a live event Thursday called “Flash Crash, Fast Cash,” and I shared my three rules for profiting during a flash crash-- as well as my plan for profiting from the inevitable rebound.
This really couldn't come at a better time. And its information I feel every trader needs before we experience a massive rebound and the inevitable next flash crash that wipes trillions from the stock market.
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This article is supplied courtesy of WealthPress.com