Feb 14

The Market Today



Happy Valentines Day!! I hope everyone is enjoying their valentines day with their loved ones! An interesting day in the market to say the least. The market clearly has no confidence in the Austerity agreement from Greece. This being said, the market was negative, could be from the lack of confidence from Greece, or just some exhaustion from the up move following the bottom in late September/early October. The losses turned to gains in the last 30/45 minutes of trading. Strong buying came in, to erase a 75 point decline, and closed about 4 points higher. One interesting look, is the King Dollar. Should the Dollar index break 79.90, we should see a continuing of the Dollar advance. Japan’s central bank has been intervening, trying to lower the Yen, to improve their exports. This may be a reason for the Dollars advance. Another maybe a shift in risk. Only time will tell. Should this advance continue, commodities will move lower. This being said, it may be time to lower exposure to commodities in the short term. Should the Dollar not break the 79.90 level, it would be time to add to commodities. Bottom line, keep a strong eye on that level if you have strong commodity exposure. I discussed some tell tale signs of a market type: ie, Barron’s callling for Dow 15,000, strong market bears turning bullish, etc. Another sign, with more credence to it, is the VIX index. This index measures market volatility. Generally when the VIX is below 20, there is no fear of a decline of significant magnitude. For the last week or so, this index has been below 20. On Friday, the VIX closed above 20, then closed back below 20 again today. When we see VIX levels hit 14-17, there is too much complacency in the market. Should those levels be seen, I would strongly advise peeling back equity exposure, and getting defensive. For aggressive investors, I would advise initiating short positions, or buying puts. In summary, the market action feels toppy to me. We may see a continued advance, but this most likely will be short in duration, and a short term top will soon be upon us. Please continue to tread lightly here.

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