All Entries in the "Closing Bell" Category
Stock Market – Up or Down? Please Vote
Wow, it’s been quite the interesting ride the past few weeks. I kept hearing rumors of a market correction before the election and then a market climb as the Republicans take back the house and possibly but not likely the Senate. It’s been quite the opposite as the market continues upward hitting new highs. So has the market recovered and will it continue to climb, or will we see a significant drop (defined as 6% or greater drop in the Dow) before the end of the year? I’ve spoken to as many people predicting gloom and doom as I have people thinking we have turned the corner to recovery. The pros and cons of a continued strong stock market:
Pro’s
It’s earnings season and so far the results have been pretty good. Profits are up, guidance is for the most part more positive than negative. Unemployment is down, companies are cash rich and expectations are for a strong retail holiday season. That all sounds good huh. See, the recovery is HERE.
Cons
Not so fast, although the above is true, although profits are up, gross margins are not. The jobless rate has not come down. Companies are buying back stock or buying other companies, but they clearly are not hiring. There is talk of quantitative easing (in essence printing more money to stimulate the economy) but that is a short term fix that will cause more damage long term Not to mention the rising deficit. Need I say more.
So now it’s your turn to weigh in. Please leave a comment and let me know what side of the fence you are on and why. Your opinion matters!
Trading the VIX
The market recovered almost all the losses of yesterday on the further weakening of the dollar. As the dollar goes down, the market goes up. Its an inverse relationship that is having its effect. The dollar is down 2.63% vs the Euro year to date and down .88% vs the pound just today.
As Geithner said recently, “We can’t devalue our way to prosperity”, but isn’t that exactly what the government is doing? We continue to spend, spend, which puts downward pressure on the dollar. Interest rates are akin to zero and now we are hearing about the upcoming QE2, which will send the dollar even lower. So is this really a good thing for the stock market long term.? Clearly NO! If we don’t get spending under control we should expect to see a near collapse of the dollar.
Net net, not a good thing for the US economy and were on shaky ground as it is.
I anxiously await what’s next. I’m still expecting a significant downturn and I’m even more convinced of the inevitability of it now. So how do I intend to protect myself and make money on the downturn? I’m trading debit spread puts and I’m trading deep out of the money calls on the VIX. More on the specifics on my VIX strategy tomorrow.
The Dog Days of August
I cant get my orders to fill, why, lack of volume. As expected, August is a slow month. I guess everyone is on vacation, maybe I should be as well. I place an order and it sits, this month for weeks before it finally fills. Some of my orders dont fill at all. It’s frustrating, so instead of bucking the trend, I’m going to chill, maybe the beach is a better option for today. Get it, option…..
Why the Rally??
OMG, what a day, the market closed up over 200 points, on WHAT news? There was none, no I take that back, there was news, it was bad news, but the market shot up anyway. Whats up with that??? I thought we’d see another day of the Dow up 100 points and then give it all back in the last hour of trading, but the market did the opposite. So what is really going on? There are those that say this is a result of electronic trading, and doesn’t reflect the real opinions of investors and professional traders. I really don’t know what to think, is this a result of the belief that the global markets are settling and that the euro is stabilizing? And does this mean that tomorrow will be a profit taking day and the market will drop down 100 – 200 points? I’m hearing a lot of predictions of profit taking tomorrow. We shall see. I can’t wait..
