Tag Archives: Uptick Rule

Where Is The Uptick Rule?

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I watch the market recover today, enough so that the smaller retail investors (middle class investors) might have believed the market had turned and bought some stock.  Then WHAM, either the whales decided to take profit, or the automated machines (stock terminators? hasta la vista baby) kicked in and the DOW ended up down more than 173 points.

I watched this turn of events and all that I kept wondering is “Where is the Uptick Rule, and why hasn’t it been re-instated yet“?  Ironically, as I thought this question, other older guest investors on CNBC asked the same question about 30 minutes after I wondered it myself that day.  I’ve been complaining about the loss of the uptick rule for quite a while!  I first mentioned it in an article on May 2010 as a small blurb about the Uptick Rule.

So what is the Uptick Rule?  Basically that a given stock has to be bid up a tick before shorting can happen!  Now it won’t stop a stock from going down in value and that wasn’t why it was invented!  It’s main purpose is to slow the decline of the downturn of a stock and to prevent corruption from happening because shorter can not pill on to the stock that’s falling like a rock dropped in a pond.

Oh, I heard the excuse how doing away with the uptick rule would help some Wallstreet folks keep their jobs back in 2008, I think that was a month or so before the market started to crash.  But I have to wonder, what about the small investors like me and the rest of the middle class?  Why doesn’t the government re-instate this rule?  With the machines and the whales playing in the market along with the small-scale investors, we are getting slapped around like rag dolls.  As an analogy, it’s like a 4th grade football team playing against the NFL football players…  Obviously, the 4th graders are always going to get hurt!  Why doesn’t the government wake up and realize this?  At least the Uptick Rule gave the middle class investors a fairer chance against the machines and whales…

If anything, it would give the market a boost of confidence, that the government is not going to take market manipulation!  Whether the effect from the reinstatement of the Uptick Rule is real or not, at least it would show the people who the government isn’t trying to destroy everybody’s wealth.  How can they just sit on their hands and let the boomers go bust?  It’s like kicking an old person if you see one out on the street!

Today left a bad taste in my mouth, as I really wondered if the stock market is corrupt and being manipulated.  What incredible sad it would be if that were true.

So I have to wonder, after so many years of not going far enough, Where is the Uptick Rule?

Thanks for letting me rant,

MR

Stock Market Rebalance Opportunity Missed

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Yesterday, I missed another opportunity to rebalance my 401(k) account.  I had this magic number in my head, and once I hit that mark, I swore to myself that I was going to rebalance my portfolio so that it had less exposure to the equity markets.  I was less that $1,500 dollars away from hitting that mark.

So am I going to sell out tomorrow?  No, most likely the market will recover a bit so I’ll hold on.  I don’t know about next Monday though.

I actually like it when the market is a bit choppy for a while, that enables me to buy some more shares at a lower price (dollar cost averaging).  Of course, I still want the general direction of the market to climb upwards…

In my taxable brokerage account, I still have some money on the side, but I’m not in a hurry to jump in, especially so early in the game.

The amounts in my accounts are now much more important to me, I must shift my portfolio so that I am exposed to much less risk in the marketplace.

I will still keep my speculative amount for playing in the market though, but only 10% of my entire balance.

Readers, please consider creating a balanced portfolio (a mix of mutual funds, bonds, and cash like investments) at the beginning instead of just having and agressive equity only portfolio.

-MR

UPDATE: (5/7/2010): Sounds like the problems was worsened by market orders!  This should be a wakeup call to us all that we should always use limit orders when making trades!  The markets still doesn’t know what happened yesterday.  They do believe that with the complex electronic system being used, a cascading effect took place.  I have to wonder if the uptick rule mechanism would have prevented this from happening?  The flaw would still be there, but perhaps the uptick rule would have short circuited the damage.