Update and Comments – 08.6.11
Just a quick update on the activity. New subscribers welcome aboard!
When it seemed things could have been better we saw very little daylight. Early in the week there was optimism with a deal in Washington but the reality is it wasn’t enough and the markets responded – loudly.
Thursday was an atrocious day of selling, Friday was an amazing day of volatility, with the spx sliding 40 pts from the high and moving up 40 pts from the low. Breadth was awful and the VIX did manage to reach 39 this week, a level not seen in a few years.
Late Friday S&P downgraded our debt rating, but this may eventually be a good thing (see today’s article here). The coming week will be quite interesting as the markets are more oversold than we’ve seen them in quite a long time.
As you know, we sold everything in the portfolio Tuesday night/Wed morning. Did I see this day coming? Can’t tell you I did but the signs were flashing. When the markets did not like the economic reports and responded on Monday/Tuesday then we knew it was time to be sidelined.
I’m looking for put play opportunities as well but will likely wait for the market to rally some before jumping on board. Oversold and stay oversold for awhile, but with the Fed meeting upcoming and some likely stimulus announced we don’t want to get whipped around.
A highly volatile market is one where prices jump around in a big way, option prices are rising, too. Quite a bit of fear is being talked about now and while the downgrade is not a positive I think at this point it’s not a time for panic (that was Friday with the VIX). This credit downgrade is a good start to help us get financial house in order.
In the meantime, we’ll be patient and watch the action from the sidelines. Cash is a decision and a position we can/should be comfortable with – especially in moments like this.
If you need more details than were provided in the alert let me know, bob@explosiveoptions.net.
Have a great weekend see you on the twitter stream next week!
Bob Lang
