There is no way to put any positive spin on this past week. Ever the optimist, I truly had faith that our government were going to get this whole mess settled before the drop dead date of August 2. WHAT WAS I THINKING? And no, I was not under the influence of illegal chemicals (but I probably should have been).
This still may happen but without much room to spare. I’m exhausted and tired of the chatter, rumors and disappointment over this issue. I am sure you are, too. It’s not a big deal once the situation is corrected. Aside from that, markets had their worst week of the year while the fear rose sharply in the wake of uncertainty.
That unknown factor is being fueled by rumor and innuendo in the press – great for ratings and headlines but truly useless in reality. It all came to a head on this last week in July – the SPX falling 4% for the worst performance in seven weeks.
The Nasdaq actually did a bit better but the Dow Industrials was slammed. The VIX rose more than 50% during the week and closed near the high levels set during the Japanese tsunami in March. For the month of July markets finished down around 2% or so.
The big stunner that came out today was the weak GDP not just for Q2 but for Q1, which was downgraded to under 1%. Under the hood on the Q2 number shows inflation was passed through, so this may be watched closely by the Fed in case there could be some QE3 on the table. If inflation expectations are lower then we could very well see it – soon.
While there were some rays of sunshine this week we had a very challenging week as you might expect. Some of our plays did extremely well – We are currently sporting big gains on DECK, CME and took out some profits early in the week on GOOG and BIDU. (if you would like a listing of current plays email me at firstname.lastname@example.org – we are working to have this on the site very soon).
After a fairly decent time with earnings plays the first week or so the last several plays burned us badly. Just no excuse for these plays like ACOM, MUR, RVBD, JNPR and others. While we know the game is tough I certainly expected better results. We’ve been through this before (remember June?) – so stay with me here…it WILL get better.
This is why we only use a small bit of capital because after a week like this we still want to be standing tall. So, we still have several trades open and a few good winners (and near winners), so we’ll see how things go in the coming days before we start peeling things off, our August plays have three weeks remaining so let’s be patient.
We know what may be coming early in the week with the debt ceiling issue, if that can be set aside for awhile the markets have a good chance of moving up. But there are other things to consider.
Wed-Fri is all about jobs with Friday being the big day. After two straight months of disappointing growth the expectations are low this time around (for good reason), so perhaps a positive surprise could stoke some interest.
Sunday evening brings us the China PMI final, while more earnings hit the street and key economic data will be shown before the following week’s Fed meeting. We have the beginning of the month which usually means new money flows.