The Dow Jones Industrial Average is having a very rough beginning to the new year. Prices have dropped by triple digits two out of the first three days of the new year, and it has set off all sorts of alarm bells for traders. The Dow is comprised of the 30 biggest and most representative companies of the U.S. economy, and as such, it has become a benchmark for big business. While the S&P 500 is considered to be the most representative of the U.S. economy as a whole, the Dow is more of a snapshot of what the biggest and the best are doing. Most other companies will tend to follow suit behind these companies, so when the Dow performs poorly, other companies will often do the same.
There are a number of reasons why the Dow, and other major indices in the U.S., are performing so poorly. There are international growth concerns prevalent right now in the trading community, especially when it comes to China. A big selloff in China on Monday, January 4th, sparked a selloff in the U.S., too. This selloff was mostly unfounded, and that is a good thing from a long term perspective. Now that a few days have passed since then, U.S. prices are still dropping. It is frustrating for traders because there are few fundamental reasons why this should be happening. It is purely sentimental trading, and the fact that this sort of action cannot be predicted with facts and figures can be downright disheartening. Investors are nervous, and they are acting accordingly.
Another huge concern, one that does have an immediate impact on many U.S. companies, is the price of crude oil. As oil’s freefall continues into 2016, investors are now legitimately concerned that prices could become problematic for big Dow companies like Chevron, Caterpillar, and Exxon Mobil. Crude oil’s price per barrel is currently sitting below $34, and there is enough panic here that prices could be pushed down even further. If this happens, the Dow will be likely to drop even more severely.
The U.S. economy is not in the clear yet. Geopolitics need to stabilize, China’s economy needs to begin to show some sort of traction, and oil needs to rise up in price to a sustainable level. All of these things are possible, but it might take several more weeks before any sort of visible stability is achieved, unfortunately. Binary options traders have an especially rough time at this point simply because sentimental trading is winning out right now, and that makes longer term trades—anything lasting more than a few hours—extremely difficult to predict. That leaves the ultra short term trades as the best choice, but these have lower rates of return, generally speaking, and they are already tougher to predict than average. It is a sticky situation to be in, although it’s certainly not an impossible one. There are still opportunities to make money, you will just need more prudence when it comes to checking things before you enter any trades.
This doesn’t mean that there are no bullish choices out there. The U.S. dollar is performing well right now, and smaller businesses are pushing forward despite having the giants weighing down indices. Companies like Google and Gilead are seeing their stock prices go up despite what seems like the world crashing down around them. There are plenty of opportunities to make money going long still, regardless of what kind of trading you are interested in doing. Binary options alone see many opportunities, but this does not need to be your only method of creating profits right now.