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Apr 15

The Market Today 4/15/13: Protect

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First, I would like to say that my thoughts and prayers are out to those hurt in Boston. It is so senseless to kill or hurt innocent people, families and participants enjoying a great event. Aside from the tragedy in Boston, the mood is never particular good on April 15, due to all the checks that are written to the IRS!! Besides that, the mood was sour right from the get go. News from China over the weekend showed that things are slowing in China. The ripple effects of this we strong. The commodities market were destroyed. Gold itself lost nearly 10% today alone! This has followed strong losses in the yellow metal in the previous few months. Surprisingly, the move in the dollar was relatively mute. The same can be said for interest rates. Interest rates on the 10 year Treasury closed just above 1.7%, just above the recent low of 1.67%!! The stock markets across the board lost around 2% for the day. This is the largest move that we have seen in quite some time. Based on my previous commentaries, now certainly looks time to protect portfolio’s, and/or raise cash and take profits. The sell off today was also on much stronger volume. Volume increased by about 42%! This is a strong distribution day. As you can see looking at the above chart, the S&P closed just below the ascending trend line. This trend line starts last April of 2012. This was the first time that this trend line was broken since it broke above this line in early March. Again, when a major trend line breaks on heavy volume, this is not a good sign. Also, for the short term trader, the market knifed through the 10 day moving average of 1,570. All indications in after hour trading, is that the selling has continued. Should nothing change, we could be looking for a rough open tomorrow.

Protect: Gold

To make things even worse, we have a heavy earnings release schedule, and the April Option Expiry this Friday. This will certainly cause volatility to spike over the next few days. On top of this, as I have mentioned previously, we have the sell in May and go away trading pattern. The price of gold dropped significantly today, losing nearly 10%! This is obviously concerning for owners of gold, and related investments, but it could be very concerning to equity shareholders. The reason for the concern, when gold drops this significantly, after the metal fell hard last Friday, as well as over the last few months, this is signalling something else. What this is saying, is that there is not inflation in sight. In fact, deflation is in sight, and is next worry. This is especially worrisome to the Fed, which is counting on inflation, to help get through this financial crisis. Should deflation in fact be upon us, this will cause major problems for the Fed. The cost of unwinding the QE programs will skyrocket, and cause much deeper problems for our Government, and economy! As I tweeted earlier, the next support levels for gold are 1,308 then 1.170!! This being said, this gold move may not be over. Should this be the case, if gold continues a strong path down, this will start to pull equities down with it. Bottom line, this is time to protect your portfolio, and take defensive measures!

Protect: Earnings and Options Expiry

As I briefly eluded to in the paragraph above, we have earnings season in full stead this week. We have Google out on Thursday. This will be widely viewed, and reacted to. Also, this Friday is options expiry. All April options expire as of the close this Friday. Typically speaking, volatility is usually higher in options expiry week. With the events of Today in Boston, the weakness in the commodities markets, the need to protect your portfolio is now!

Author Sean Rhodes is an expert in financial markets and helping you manage your money. For a no-risk consultation, check out Sean at the following link for more information and expert advice on investing in equities and helping investors protect their portfolios!

 

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