Winning Edge Trading: Successful and Profitable Short- and Long-Term Trading Systems and Strategies

CHAPTER 1

The Great Stock Market Meltdown

The turbulent U.S. economy and stock market have recently encountered a chaotic and challenging chain of events. The year 2008 may be recorded as the worst year ever for the phenomenon of wealth destruction for investors and traders. Despite the massive $820 billion U.S. government bailout, the stock market has continued its spiral sell-off and meltdown. For early March 2009, the Standard & Poor’s (S&P) 500 index, since peaking at an all-time closing high of 1,565.15 on October 9, 2007, had lost 57 percent. The Dow had lost nearly 54 percent since closing at an all-time high of 14,164.53 on the same day in 2007. Since hitting a bull-market high of 2,859.12 on October 31, 2007, the NASDAQ had lost 56 percent.

Investors suffered a great blow when the S&P 500 plunged to a 13-year low as fears of a prolonged recession sparked a massive selloff, closing at its lowest point since April 1, 1996. However, as investors experience their biggest-ever losses in pension funds and investment portfolios, some financial gurus and advisors continued to spew out “stay the course” advice. They dispense this so-called wisdom as though we hadn’t learned the hard lesson of listening to their irresponsible and downright fraudulent advice just months before on some of Wall Street’s long-term holdings, such as Lucent, WorldCom, Enron, Merrill Lynch, and Bear Stearns.

Wall Street today is encountering its most disastrous crisis in decades. The demise of Lehman ...