Technical Trader: A bit on "Margin"

One of the interesting aspects about today's plunge on Wall Street is that it is all about "safety" and "security" and the margin calls have not begun yet----margin calls are based on the closing values, and the last time the markets in the US closed was on Friday. The Martin Luther King holiday prevented margin calls this morning which would have been a more realistic situation.

Professional traders anticipate their margin calls but many private investors do not. Hence, the first forced trading if the markets close at sharply lower levels will be at tomorrow's opening. To the best of my knowledge there are no interday margin calls---although there is a case that there should be...this is a technical loop hole as I surmise...and it can lead to traders getting in trouble in very volatile trading sessions if they abuse the margin levels intraday.

In forced margin selling, one can see the "baby thrown out with the bathwater." The trick is if one can determine which is which, to focus on it.

Lazlo Berrini mentioned on Bloomberg this morning that it is best to buy with the wind at one's back, and his tendency is to observe till that happens.

He also mentioned something interesting: The two golden rules of Wall Street are "Don't fight the Fed" and the second being "Don't fight the Market Trend. The Trend is your Friend." The problem of course is that those two traditional platitudes are suggesting different courses of action for traders. So much for platitudes.

Stay tuned to The Evansville Observer. Where we suggest that active traders sip ice water during today's action. I have switched to Starbucks bold, since I am not in the market.

Posted by Evansville Observer at 8:48 AM