Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Bulls Gain Steam, but Euro-Zone Concerns Bear Close Watch

Stock-Markets / Stock Markets 2012 Jan 25, 2012 - 03:46 AM GMT

By: PhilStockWorld

Stock-Markets

Best Financial Markets Analysis ArticleConfusion is a word we have invented for an order which is not understood.” –  Henry Miller

The Dow Jones Industrial Average (DJIA) rose by almost a full percentage point on Friday, but like so many aspects of the current market, that number is somewhat misleading.


Tech leader IBM powered the Dow to its fourth winning day in a row, which left the blue-chip index up 2.4% on the week. However, with IBM being the highest-priced component within the Dow universe, its upward move, coming in at over 4%, disproportionally raised the Dow’s bottom line.

For comparison, if you take a look at the S&P 500 Index (SPX), it gained a relatively paltry 0.1% on Friday. However, the benchmark index, which offers a far more accurate read on the equity market in general, did manage to gain 2% on the week, placing it at a level not seen since late July of 2011. It now has a very minimal cushion of 1% atop the psychologically important 1,300 level, while also sitting relatively high above its own 200-day moving average.

Rounding out the big three indexes, the Nasdaq Composite Index (COMP) lost 0.1% on Friday, suffering defeat at the hands of the bad beat investors put on Google (GOOG) following its unenthusiastically received 4Q earnings report.

Fourth quarter earnings season has, on the whole, been the prime mover for the mini Bull Run that Wall Street has experienced since the ball dropped on the New Year. Though the numbers reported by companies so far have generally met analysts’ expectations, the upward trend in stocks year-to-date can be at least partially attributed to the fact that, so far for the year, domestic reports out of Washington have fallen into the “neutral-to-fair” category.

Probably a far greater factor in January’s current upward trend has been the fact that negative noise out of the euro-zone has been minimal. And, while investors are hardly dancing in the streets due to enacted solutions geared towards solving the EU debt crisis, sentiment does seems to be leaning towards the possibility that the worst of the matter may be baked into current stock prices.

This assumption may prove to be a major flaw, at least in the long term.

While the new head of the European Central Bank (ECB), Mario Drahi, has so far managed to convey the right sentiments at the right time, helping to effectively offset some of the rumors and innuendo that have at times injected high doses of volatility into the market, the euro-zone remains a powder keg simply due to the massive debt owed by the PIIGS (Portugal, Ireland, Italy, Spain and Greece). There is only so much that Germany, France, and even the International Monetary Fund can do to stem the bleeding without inflicting wounds on themselves.

The fact remains that the weapon of choice expounded by both investors and the broader European Union, deeper austerity measures, is nothing if not a prescription for recession for EU member-states. And, with an estimated 18% of profits of S&P 500 companies coming from Europe, it is not a stretch to see that a slump in EU growth will impact both U.S. and global investors in a major way.

In the meantime, enjoy the Bull, but don’t be shy about humoring the Bear and offsetting your portfolio with a few smart hedges.

What the Periscope Sees

Speaking of hedges, one of the Periscope’s favorites remains the VIX (Chicago Board Options Exchange Market Volatility Index), which serves as a reasonably good read on investor sentiment in general, and an excellent tonic to a reactionary market specifically.

On Friday, the VIX ended the day at 18.28, a number that it hasn’t seen in six months. Prior to last summer’s “euro-swoon,” the VIX had established a solid support level around 15. On the other hand, once the cracks in the EU began to come into sharper focus, the VIX zoomed up close to 50. With some of the euro-zone issues being addressed but not solved, there is a good risk-to-reward trade to be made here.

While you can’t trade the VIX directly, you can use one of several liquid ETFs that track the Volatility Index. The most popular and most liquid choices continue to be the VXX (iPath S&P 500 VIX Short-Term Futures ETN), which tracks the near-term futures, or the VXZ (iPath S&P 500 VIX Mid-Term Futures ETN), which tracks VIX mid-term futures.

ETF Periscope

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

- Phil

Click here for a free trial to Stock World Weekly.

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2012 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in