Meta-Trader - Equities Crushed

Welcome back Meta-Traders.

It was another week to forget with equities getting crushed on the worst week since 2008. The US Congress pulled out a debt deal on Tuesday in time to meet Treasury's August 2 deadline. With disaster averted, the market was due for a big rally, right?

Wrong, instead the market sold off and sold off hard. By the time the dust had settled, my portfolio was down about 4% for the year and had lost the better part of one year's worth of gains, kicking its value back to what it was back in September of 2010.

The selling was indiscriminate. One example is CAC International (CACI) a government IT contractor. This stock made a new all-time high back on July 6, and I was loaded long in 3 separate legs, added as the stock moved higher. And I was sitting on a nice profit and expecting higher highs. Instead, the stock sliced lower and I ended up selling the entire position at a loss as it broke $55 and it closed the week at $51.59.

Some of the action here is due to the new psychology of the debt deal. A few short weeks ago, government spending was almost a certainly. Now with automatic cuts taking affect if congress won't act, government spending itself is now in question. Other industries such as Health Care contractors (example HMSY) and defense contractors (example LLL) which get much of their revenue from government spending got crushed and gave back the better part of a year's gains in a few short days.

Usually in times like this, the Fed comes to our rescue with an emergency rate cut, or some re-assuring words that they will provide all the liquidity needed to keep the market participants from failing. With no bullets left in that gun, the European Central Bank came to our rescue at about mid-day EST on Friday when they announced that they would start buying Italian government bonds in exchange for austerity measures. That was enough to stop the selling on Friday and reverse a 3% intra-day loss on Friday to end the day nearly flat.

As if all that weren't enough, S&P came in and downgraded the US from AAA to AA+ late Friday evening. Perhaps this is what all the selling was about in the first place. Fortunately, we have the weekend to digest that news. The US Treasury has basically already shrugged off the news saying it wouldn't affect their operations in any material way. It does affect confidence however, and we took a big hit in confidence this past week.

As for my own trading, I sold CACI. but stayed long everything else. In fact I added to AAPL, NFLX and bought some deep in the money calls in AMZN. I think we are a deeply oversold here and due for a bounce. We'll see what next week brings.

As for Automated Forex Trading, it was a surprisingly quiet week. Taking a look at my Meta-Trader platforms, I saw an unusual number of execution related issues. Some could be explained due to prohibited hedging, and other perhaps due to fast market conditions. There's also the potential for some platform related issues.

Since I added the 3 COATL demo accounts, my laptop computer appear to be close to capacity with the CPU "pegged" or running close to 100% most of the time. I will keep a close eye on this in the coming week and make adjustments as needed.

Speaking of COATL, my 3 new demo accounts started with a thud, with 2 of the 3 losing about 5% and the other gaining about 5%. It will be interesting to see how things unfold going forward.

Have a great week and keep your money safe and your powder dry.