Monday, March 16, 2009

Monday Morning Musings

The market is higher in early trading for a 5th consecutive day. Actually, the S&P 500 is higher, led by the bank index (+4.9%), while the Nasdaq is lower.

There is talk that the Treasury will soon offer more details regarding its plan to address the bad assets on banks balance sheets. This is helping the positive sentiment in the financial sector, as well as further news that the government is also making plans to revamp its oversight for banks.

Oil is trading a bit lower, near $45, after OPEC decided to leave production unchanged. I was a bit surprised by this move, given how much oil prices have dropped, and I think the decision could leave oil prices trading below $50 for a while longer.

Asian markets closed nicely higher overnight. The dollar is mixed this morning, while oil and gold are lower so far. The 10-year yield is higher at 2.95%, looking like it wants to break north of the 3.0% level. And the VIX is higher, near 43, despite the overall gains in the market.

The VIX bounced off its 200-day last week near 40, and could break below that support on a further rally in the market. But in the short-term, its stubborness above this level makes me think we could have a big down day or two this week, which is also options expiration week.

Trading comment: I didn't alter my long or short exposure much last week. The small etf hedges that I left on from weeks earlier acted as dead weights in my portfolios, but that is always the case when you get sharp rallies.

I still want to have some protection on until the S&P 500 starts trading comfortably above its 50-day, and reverses this long downtrend that has been in place. That is a longer-term time frame, but I still want to trade the shorter-term moves as well. I would expect the market to pull back at some point, which I would likely buy into, before making another push higher towards its overhead 50-day.


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