9 Ağustos 2011 Salı

Market Finally Bounces

The markets are finally enjoying a respite from the selling and bouncing this morning. Asian markets were lower overnight, and when I went to bed last night our futures were pointing to a lower open. But the selling finally dried up, and those futures were pointing to a higher open by this morning.



Europe's markets are also bouncing slightly, save for Germany which is still down a bit as of this post. Germany has been Europe's best performing market, so it is a little disconcerting to see it still down. Hopefully Asian markets will rally tonight.



The FOMC will make its announcement later today, and investors are on the edge of their seat to see what Bernanke will or will not say regarding future monetary stimulus. I don't think he will say anything that hints of QE3, but hopefully he will say something to sooth the markets. Bernanke wants a positive wealth effect, so I'm sure he hasn't been pleased with recent market action.



The dollar is lower today, which is boost commodities. Oil prices have bounced near $81.90, while gold prices hit record highs earlier but have pulled back to $1724 recently.



The 10-year yield is up slightly from its recent plunge, trading at 2.38% currently. That's about the levels it touched back in October 2010.



As for the volatility index (VIX), it has basically doubled in the last week, and yesterday it surged an astounding 50% to close at 48.0. Today is is down -13% near 41.65, but still elevated.



Trading comment: The market is currently more oversold than it was at the March 2009 bottom. That is pretty surprising. Moreover, yesterday saw 67 declining stocks for every 1 that rose. My statistician friend told me that is the lowest breadth seen since Germany invaded France in 1940! That means almost no one alive trading today has seen anything like what we witnessed yesterday. I long for the days when big brokerage firms used to actually make 2-way markets in stocks. I hope the SEC looks into this issue and comes up with some sort of remedy or improvement. Anyway, with the markets that oversold, we should get more of a bounce. It may come in fits and starts, but that's okay. You don't have to be a hero and try to nail the bottom. Look for those stocks that held up the best and could lead on future rallies.

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