Wow. What a week that was.
•Intraday market swings setting records
•Greece riots playing out on CNBC spurring questions of European support and U.S. fallout
•Volatility becaming the new market tag line again
•Talks of possible computer glitches and/or market manipulation
Obviously, we experienced some market manipulation last week, mixed in with profit taking, panic, and confusion. So, now what? With volatility on the rise maybe it makes sense to sit on the sidelines. Or, maybe this is the time to stock up on bargains suddenly unearthed by the large sell-off.
The problem for me, at this juncture, is that there are just too many questions and conflicting data points… and more importantly, everyone is emotional.
Oil – what a mess. We’re under $80/barrel. Does that mean it is time to buy? Hard to imagine oil dropping much from here, right? Well, we have a horrible disaster festering in the Gulf. There’s chatter of a possible China slowdown and, of course, a nagging economic paralysis in Europe. How does all of that help drive up oil demand (and price)? Additionally, a strong dollar tends to take the wind out of oil prices. However, my gut tells me that oil is undervalued right now and might hit the $90s as we approach the summer. So, what do I do?
Oil is just one of the question marks. What about banks and other financial stock plays? Or, how about the jobs report looking good, overall, but unemployment is still near 10%?
Despite all the questions and the market correction last week, I’m optimistic. Earnings season was pretty good and most of the economic indicators are still pointing us out of the recession.
The week ahead (at least Monday):
My crystal ball is in the shop right now, so I don’t know what’s going to happen. But, here are my thoughts.
Focus back on America. After last week’s eye on Greece, I think we’ll see a little more attention back on U.S. Yes, Europe will still receive a lot of interest, but the EU’s announcement today that they are going to toss a lot of money at the financial problems will likely calm markets a little and allow short-attention-span America to focus back on ourselves.
Oil back up over $80. If oil pops back up on Euro recovery tomorrow, then there will likely be some nice scalps and swings in the oil sector. I’ll be watching the USO tomorrow for directional indicators.
I also think that a little market confidence will come back and we’ll see a rally. With any rally, investors will jump into the speculative plays for short term booms – that’s exactly where I’ll be this week if the move does happen (small caps). The end of last week’s volume was huge – I’m hoping that it was enough to be a blowout and most of the sellers are gone.
A few news worthy events that might hurt the market this week: ash cloud, Europe, and a pile of economic data reports.
I’m holding off on offering up any charts tonight because I think tomorrow night is the time to create charts. Right now, the charts are generally a mess and the setups need a day to recover/stabilize before I can really mark them up as good swing opportunities. However, I will be participating in trades and looking to scalp and stay light on my feet.
Look for some chart setups tomorrow night. See you in the Boom Factory.
