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Big Intra-day Swings
Posted On Monday, June 14, 2010 at at 3:54 PM by Finance Fanatic
For now, we are smooth sailing back above 10,000, which makes many of the bulls happy after the nerve racking jolt markets have received the past few weeks. However, low volume mixed with large intra-day swings continues to make markets a very unstable to buy into at the moment. Today was a perfect example of that. At its highest point, the Dow was enjoying 100+ gains for the day, as investors were once again finding security in higher risk securities. Bonds and treasuries were getting hit in the morning as confidence was climbing. However, into afternoon trading, Greece received yet another downgrade from S&P and investors reacted to the negative news by taking cover. The Dow closed down 20 points.
Volatility is becoming more and more normal on a daily basis at this point. In fact, it is very reminiscent of market trading in the last quarter of '08 (minus the consistent huge crashes in the market). The volatility, coupled with the low volume is making it real hard for investors to feel comfortable buying more risky securities. Until the Euro becomes stabilized, I believe that volatility should continue to be expected.
With Europe's problem, we are continuing to deal with the oil spill in the Gulf. BP's shares have taken an enormous beating and are at an all time low as the oil giant continues to commit to paying for the clean up. I am sure they would have much rather dealt with Bush in this situation than Obama, as The President is making sure the pay for every last drop and then some. BP will come out of this and grudges will be dropped, but I don't see an entry for them anytime soon (definitely down the road though).
Real estate remains to be another huge question mark. It seems as just as something begins to gain traction in the industry, something else brings it down again. Transactions are increasing as sideline money is becoming itchy. However, banks are cooperating less and showing less leniency for loan modification. On top of that, many real estate professionals are aggressively fighting the proposed "Carried Interest" bill that is floating around the Senate as we speak, that could essentially increase taxes for partnerships of up to 120%. You can believe that will show up in the bottom line. A double dip seems extremely likely and I would be surprised if we didn't see that begin before the end of the year. Fall and winter months seem to put real estate on ice.
As for now, longing the dollar, gold, and short term treasuries seem to make sense. This uncertain volatility creates a dangerous environment for trading, both on the long and short side. The NASDAQ still remains to be the princess of the prom, and I expect that to continue as we go further throughout the year. Also, be prepared for yet another run from Apple when those new iPhone revenues (and continual iPad sales) start to hit their earnings reports. Happy Trading.
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