Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Short-Term Traders Split on the Direction of Markets Heading into 2009
11/20/2008 12:01 am EST
While online traders typically hold for shorter timeframes than traditional investors, forecasting the direction of the markets is an important component of an overall trading strategy. Because markets tend to be driven as much by participant sentiment as fundamental data, InterShow has been gauging trader and investor sentiment for several years.
A survey conducted by Traders Expo, the largest convention for active traders and investors, was compiled to determine trader sentiment about the direction of the markets heading into the final month of the year. Over the course of several days, traders were asked their opinion about a variety of financial issues, including the overall direction of the stock market through the remainder of 2008, their opinion on the value of oil, gold, and the US dollar, plus interest rates and inflation.
Some notable results were:
- 48% of traders surveyed are bearish on the prospects of the Standard & Poor's 500 through the remainder of 2008
- 75% of traders surveyed feel the value of the US dollar against other currencies will remain the same or rise through the remainder of 2008
- 65% of traders surveyed believe gold will remain between $700 and $800 through the remainder of 2008
- 44% of traders believe crude oil will be close to $50
by year's end, while 44% believe it will rise to around $75 by December 31,
Also of interest was the fact that while most traders felt the US dollar would remain the same and even rise in value through year's end, only 42% of traders felt it would result in "modest" or "significant inflation." Compounding that belief, 51% of traders surveyed believed the Federal Reserve will keep interest rates unchanged for the remainder of 2008.
Short-term traders seem to be more willing to trade the downside of the markets than in past surveys. Twenty-six percent of traders will execute trading strategies that include up to 25% of their total trades based on a belief that a security will lower in value. Nearly 20% stated that between 51% and 75% of their total trades would take advantage of lower values in the marketplace.
Finally, while short-term traders continue to favor stocks as their primary trading vehicle, the tremendous volatility, it seems, has pushed traders toward other markets including foreign currencies and futures and commodities. With the basket of securities growing each day with new products launching on and off the exchanges, traders are branching out into other areas to find short-term opportunities. Notably, ETFs are becoming more popular as traders look for highly liquid markets that lend themselves well to quick executions and simple ways to trade entire industries or specific asset classes.
The Las Vegas Traders Expo, taking place this week on November 19-22 will provide another opportunity for traders to discuss their strategies and beliefs about the market with fellow market enthusiasts. Short-term strategists from around the country will be able to share their viewpoints and learn what other successful traders are doing to find opportunities in these volatile times.
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