In this past Weekend Review, Itz again and repeatedly echoed the view that 'this' market had reached an overbought level and indicators reflected that. A pullback was long overdue and would actually be a healthy event. Equities fell 213 points today as investors are again worried that debt problems in Greece and Portugal could threaten the global economic recovery. Standard & Poor's downgraded the debt of the two European countries, all the major market indexes were down about 2%.
The ratings downgrades also sent the dollar up more than 1.1% against the euro, hitting its highest level in about a year. At the same time, gold and Treasury prices rose as investors sought safer investments. The three often do not trade in the same direction. The news about Greece and Portugal also drew some of the market's attention away from testimony by Goldman Sachs CEO Lloyd Blankfein and other top executives from the bank on Capitol Hill. The executives testified about the company's dealings in mortgage-backed securities during the credit crisis. The SEC has charged Goldman with civil fraud, accusing it of misleading investors about investments tied to subprime mortgages. Matter of fact as I type this, I'm listening to CNBC and the hearing.
The Chicago Board Options Exchange's Volatility Index, the $VIX known as the market's fear gauge, surged 30.6%!! It often jumps when investors become rattled. Still, at about 22, it is far below the 89 that it reached in October 2008, at the height of the financial crisis.
Tomorrow the market will be focused on the Federal Reserve, which will end a two-day, rate-setting meeting. The Fed has said it plans to keep rates at historic lows for an 'extended time' to help the recovery. However, eventually rates will need to climb to fight inflation as the economic rebound continues. Will the Fed will hold off on raising rates for some time? Bottom line the Fed, FinReg, Goldman sachs & next week's Jobs Report all market movers. The markets are transition phase~~ from a 'hopeful' recession mind-set dealing with monetary stimulus and low interest rates~~ into a 'recovery' market dealing with improving earnings and economy, higher interest rates and being able to manage inflation.
Itz has suggested using options or ETF such as ProShares UltraSort Crude Oil (SCO) to hedge the Itz Pix Portfolio and/or to take some money off the table.
Tighten your seat belts!
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