Further threats of risk-averse hedgies and negative sentiment inclined to shoot first and ask questions later have the âbottom is in' crowd seeing a bit more red in early trade. As of 10:50 ET, the S&P500 ($SPX) and NASDAQ Composite ($COMPQ) are off fractionally by -.05% to -.20% on above average levels of investor uncertainty.
It's not exactly âRed China' in Friday's session, but precipitous premarket losses courtesy of the House of Falling Daggers has established yet another volatile and emotional affair for investors. The headliner once more is general chatter of a firming Yen and a few hedge funds wanting out of a very popular high-yield carry trade that's turned into a high risk and less liquid option for profit. While some of the US market's early decaffeinated wake-up call might be chalked up to an overreaction, commitment to climbing back in ahead of the weekend is looking less than likely.
Elsewhere, a red tape well-removed from dizzying GLOBEX lows owes thanks to Fed Head Poole. In a speech over coffee this morning, the St. Louis President dismissed topics like recessionary theories, elevated market valuations and accident-prone hedgies actions working their way into stateside equities. However, with investor psychology having turned decidedly cautious-to-negative in recent days, more sweet nothings aren't making a whole lot of sense or âcents' for market bulls.
On the commodities front, hard metals are seeing further erosion of recent gains. Concerns over Asia and potential damage to those economies, real or hallucinated, continue to influence trade. With those foreign markets being large end-users of both precious and industrial metals, investors are working off negative momentum rather than actual news. The net result is further and less likely profit-taking as a precipitous slide takes further control of the tape. For its part, the widely followed Comex Gold contract (IAU, GLD) has âgapped and crapped' to one-month lows. Intraday, the Yellow Metal is off -2.5% on the day and nearly -5.5% for the week.
Light corporate news on the session is mixed and putting in hard to determine wiggles and giggles, similar to the broader indices. Headlining the session, Dell (DELL) warned on growth and profit margins. The stock, however, is witnessing one of those smug ol' âwe knew that already' reactions, as it trades higher by 32 cents at 22.33. Insurer American Intl Group (AIG) gapped and has subsequently sprinted higher in the first half of trade. The company missed forecasts, but wowed investors with news of an $8 billion buyback. AIG is up 2.48 at 69.89. And finally, lending woes are purported to be weighing in on investor sentiment as well. Countrywide Financial (CFC) offered news that delinquencies ramped up 19% last year, putting early pressure on the stock and both sub and prime names (NEW, NFI, JPM, BAC) involved. However, intraday comments by US regulators related to the mortgage market have countered some of the early worry, as those financial stocks trade in split fashion.
GROWTH & MOVERS COVERAGE
Industry / Sector
RS / EPS 1YR%
Select reports scheduled after the market close and in the premarket:
Industry / Sector
Q-Estimates / Prior Yr.
1.88 / .62
Economic releases on tap:
Wall Street Forecast
INDICES & MARKET MOOD
Some investors, umm our boys from NASA, will likely prefer the use of fancy jargon like âasset dislocation' in defending positions gone awry in the Yen carry trade. Others outside of the trade, like me, might define the trade as a loss which didn't account for a market that can make toast of price models and relationships in the short-term.
The proliferation of hot ETFs continues to march on. I believe more than 300 are already in existence and one of the most recent hasn't come a moment too soon. The CurrencyShares Japanese Yen Trust (FXY) is at its all-time-highs due to the current fore mentioned and well-established global unrest. There's not much to add, but thought the product might be useful to monitor. However, without listed Puts or Calls, trading of course, isn't an option.
Elsewhere, it's Friday and the appreciation for viewing the House of Falling Daggers and not being a cast member, is being heeded. An intermediate low in the making could very well be setting up, which was written about at length in today's Growth Stock report. Hopefully though, investors are smart enough to use rules and limited risk strategies to define any bullish entries, or bearish ideas as well, as volatility continues to rule the day and being a hedge hog implies keeping our trades out of the headlines. Have a great weekend.
Index or Sector Proxy
S&P500 ETF (SPY)
Neutral / LT Bear
141.50, 139 â 140.50
146.50 â 148.35
NASDAQ 100 (QQQQ)
Neutral / LT Bear
43.29, 42.50, 41.50 - 42
45 â 45.50, 46.25- 47.25
Staff Writer & Options Strategist
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