Wednesday, July 15, 2009

The Market's Wild Ride

Yay!  The Market is up 3% today!  Let's celebrate.

On second thought, let's not.  I've said it many times but it is worth repeating.  It is not a good thing when markets move this far in any direction this fast.  It means there is panic and fear on the street.  Panic and fear on the street mean there is going to be tremendous volatility.  So as nice as it is to see a 3% gain today, we could just as easily see a 5% loss tomorrow.  Now, I don't think that is going to happen here.  I think the market is probably on a short term upswing.  Earnings season is underway and most of the people who have reported, and this is admittedly a very small sample size, have reported better than expected numbers.  If this continues, we could easily see the market rally.

On the other hand, if a few of the numbers come in soft, look out below!  I don't think this is going to happen, but the danger is definitely there.  Now, I have not made any trades for the last several weeks.  This is partially because of the job and this is partially because I've been waiting for the market to do a bigger correction.  This correction has yet to materialize and I'm in no particular hurry to rush in.  Some of my trades like TBT have been particularly weak lately so I may jump back in.  I also really do like my China trade, FXI, which is rallying nicely after taking a small break.  If I make a trade in the next few days I think it is going further long these positions.

I'm not thrilled the market has not pulled back, giving me another opportunity to buy, but these two trades have great long term value in them.  China is doing very well comparatively to the U.S.  Not great mind  you, just better than the U.S. I also really just do not like being in the dollar, which is of course why I want to short U.S. Treasuries.

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