Itz reiterated on Wednesday's blog post link that market indicators were very stretched and a selloff was imminent. However, no one could of seen the news that hit Friday. That said, one should be hedged...this markets come a long way from S&P500's 666 low. Itz has posted several charts showing that sentiment is at extreme overbought levels. Itz has also suggested selling covered calls, buying puts (volatility is very cheap), or using Proshares inverse etf's such as SCO or DUG to hedge the Itz Pix portfolio.
Friday ended the first week of earnings, it was also options expiration,everything was going fine with only a deluge of earnings reports and some macroeconomic figures awaiting them in the coming week. That is, until, the market was rocked by news that the Securities and Exchange Commission charged Goldman Sachs(GS) with fraud link, putting Goldman's Q1 earnings release and subsequent conference call next Tuesday in more focus. Citigroup is an Itz Pix holding with a cost basis of $3.85.
The GS news was the long awaited catalyst, investors were looking for a reason to take profits. Itz has been projecting a 5% to 10% pullback in the S&P500.
Though the financial products at play were complicated, the alleged scheme laid out by SEC enforcement chief Robert Khuzami on Friday was simple. The SEC alleged Goldman failed to disclose to investors a hedge fund's bet against a synthetic collateralized debt obligation that tracked a portfolio of subprime mortgage-backed securities, despite the hedge fund's role in picking the very bonds in the portfolio. This is debatable, since Goldman really isn't bound to disclose that information.
Goldman called the charges "completely unfounded in law and fact," saying it will "vigorously contest them." Still, the dramatic selloff Friday has some wondering whether this marks an end to the bull market or whether Friday's pullback was just a mild breather. So legality and politics aside the news should spill into Monday as it hits the Asian markets.
We've been in greatly overbought conditions, a 5% or even 10% pullback would be welcome here, hopefully it will be a pause that refreshes as opposed to changes the trend and marks the top.
No comments:
Post a Comment