Submitted by gregj on May 22, 2010 - 8:42am
OA Weekly – 05/22/10
Major sell off again this last week with some significant levels of support being broken by all three major markets. The 200 day Moving average was broken this week, and although we had some positive turn of events on Friday, the question remains, was it enough to turn the tide of the bearish downdraft. There have been a number of bearish analysts who have come out and “recalled” the double dip recession once again. The most notable of course is Doctor Doom himself. One particular note that I enjoyed in his piece was the idea that you can use options to hedge risk in the down moving market.
The European debt fear is of course at the heart of this panic. Will we be able to change the trend? I am not betting on it. We have had too bullish of a move in the last year, to not have some pullback.
Financial Legislation looks as if it will be an issue that the markets have to deal with sooner rather than later. The bill pushed its way out of the Senate, and now the only major step remaining is to reconcile with the House’s bill. The legislation will have a major impact on firms like Goldman Sachs. Although, they are fighting to keep the derivatives piece out of the final bill that President Obama will sign, it looks like for now the teeth are going to stick. We will see what the fallout will be.
As for the rest of the market, as was referenced in the article above, the time to hedge is here. This is not a market to try and buy the dips and sell at the top, as those can be 15 mins apart from one another. This is a time to understand and use the collar trade.
VIX/VXN – 40.10/42.81 (VIX high of 47)
Put/Call weekly Avg. CBOE –1.25 (1.53 Thursday)
Overall market movement this last week:
DJIA – down 426.77(-4.02%)
S&P 500 – down 47.99 (-4.23%)
NASDAQ – down 117.82 (-5.02%)
Next Week’s Earnings reports:
Wed: AEO, TOL
Thurs: COST, TIF, JCG, HNZ
|May 24||Existing Home Sales||Apr||-||5.7M||5.4M|
|May 25||Case-Shiller 20-city Index||Mar||-||3.0%||0.6%|
|May 25||Consumer Confidence||May||-||58.1||57.9|
|May 25||FHFA Housing Price Index||Mar||-||NA||-0.2%|
|May 26||Durable Orders||Apr||-||1.3%||-0.3%|
|May 26||Durable Orders ex Transportation||Apr||-||0.5%||3.5%|
|May 26||New Home Sales||Apr||-||430||411|
|May 26||Crude Inventories||05/22||-||NA||0.162M|
|May 27||GDP - Second Estimate||Q1||-||3.3%||3.2%|
|May 27||GDP Deflator - Second Estimate||Q1||-||0.9%||0.9%|
|May 27||Initial Claims||05/22||-||450K||NA|
|May 27||Continuing Claims||05/22||-||4600K||NA|
|May 28||Personal Income||Apr||-||0.4%||0.3%|
|May 28||Personal Spending||Apr||-||0.0%||0.6%|
|May 28||PCE Prices - Core||Apr||-||0.0%||0.1%|
|May 28||Chicago PMI||May||-||60.0||63.8|
|May 28||U. Michigan Consumer Sentiment||May||-||73.8||73.3|
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