Big volatility was the name of the game this week as the Dow put in triple digit swings from high to low every trading day.
Looking At My Screens
In our portfolios, we remain in the “red flag flying” mode, expecting lower prices ahead. In the Standard Portfolio we hold (FXY) Japanese Yen Trust, (PSQ) ProShares Short QQQ, and (EUM) ProShares Short Emerging Markets and two positions in cash. In the 2X Portfolio we entered (SDS) ProShares UltraShort S&P 500 on Friday.
So we go into the holiday weekend “short” and in cash.
The View from 35,000 Feet
The volatility stemmed mostly from international sources as the world continued fretting about Greece early in the week and Dubai and China later in the week. Upside moves were generated based on a projected European Union bailout of Greece’s overburdened economy and the downside pressure was applied when the Chinese lifted their loan reserve requirements and the cost of insuring Dubai’s debt through Credit Default Swaps rose to their highest levels since November.
The EU Finance Ministers will meet starting Monday in search for a workout for Greece and one can only wonder what they’ll be able to come up with since Portugal and Spain are coming right behind the Greeks.
The Eurozone is weak across the board as 4th Quarter GDP rose a miniscule +0.1% for the 4th Quarter and fell -2.1% Year over Year.
Closer to home we had a mixed bag of readings with Initial Unemployment claims improving along with retail sales while Consumer Confidence registered a drop on Friday.
The Week Ahead
I think we can expect the volatility to continue as we have several major economic reports and corporate earnings reports ahead, along with more news coming from abroad. Earnings reports of note include Hewlett Packard, Dell, Wal Mart and JC Penny while we’ll get news on housing, manufacturing, inflation and leading economic indicators.
Major Earnings Reports:
Wednesday: Hewlett Packard, Las Vegas Sands
Thursday: Wal Mart, Dell Computer
Friday: JC Penny
Major Economic Reports:
Tuesday: February Empire Manufacturing Index
Wednesday: January Housing Starts, January Building Permits, January Industrial Production, January Federal Reserve Minutes
Thursday: Initial Unemployment Claims, Continuing Unemployment Claims, January Leading Economic Indicators, February Philadelphia Fed, January Producer Price Index
Friday: January Consumer Price Index
Leaders: Networking, Basic Materials
Laggards: Europe, Global Biotech
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