July 8, 2021, 9:50 am EDT
China, Crypto, Housing Falling Down
US stock markets experienced a sudden drop of DJIA -400 and Nasdaq -1.7% from the opening bell. Other signs of trouble came to China Hong-Kong HSI -3%, Crypto (Bitcoin -6%, Ethereum -10%, XRP -7%) and US home builders (ETF: XHB) -3%. Although all indexes were still near all-time highs yesterday, these signs serve the purpose of a reminder for the potential sharp drop, pullback, or reversal.
There are some hedging tools like put options, leveraged bearish ETFs (1x,2x,3x) or short positions to protect and even profits from the drop. It requires skills and discipline of risk management for using these methods. Reducing and scaling back long positions are also effective to hold through the stormy season for minimal damage.
As we mentioned before, a handful of mega-caps made the major indexes to a new high. Furthermore, volumes are always on the low level which means a lack of commitments for the long term.
In summary, take some steps back to protect assets when the sky looks cloudy and rainy.