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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
April 27, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, Mr. Market announced that an
increase in volatility is to be expected in the near future. Monday’s
4% drop also spiked the VIX, the market’s fear indicator, unusual as it
has been timid recently, even on days where the averages have had multi-percent
declines. The averages spent the remainder of the week attempting to recoup
Monday’s losses, but intra-day volatility did not allow the VIX to come
in significantly by week’s end. What does this mean? From here, it
means that strategy must be altered to take advantage of good volatility
(spike upwards) and sell the “pops”, keeping stops tight to
protect against bad volatility (spike downwards) and be willing to buy on
weakness. The overall technical picture continues to look positive (higher
highs and higher lows), but one can expect quicker, larger steps forward and
backward in the near future, a good atmosphere for this trading strategy. Fundamentally,
we continue to see signs of market healing with continued takeover activity
(Oracle/Sun) and earnings reports, more or less, better than expected. A lot
of hot air has been expended on the government’s
“stress-test” this week and I would be remiss not to comment. I
see it as a smoke-screen for rerunning the early-1990’s game-plan, when
faced with the Latin American debt crisis, which was to allow the banks to
earn back their capital over time by lowering short-term rates (their
cost) and allowing them to lend long term (their income), thereby earning
larger than normal spreads. Talk of evaluation, reporting and then allowing
the failed banks 6 months to raise capital is disingenuous as no private
capital will be available for a “failed” bank, but another 6
months of super-sized earnings will have passed. It worked then and it will
work to some degree now. The question has always been “How many bad
assets do they have?” Mr.
Market’s answer seems to be “More than you know” (Barbra
Streisand, “Funny Lady”, 1975).
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