Overview and Observation:
Watching the markets last week was like "watching paint dry." In anticipation of a "Thanksgiving mad shopping rush," the markets for the month end provided little in the way of "excitement." Not nearly as exciting as watching the "maniac shoppers" at the various malls trying to capitalize on the reduced prices for high end products. The "hoards" descended on the malls in great numbers and began to demonstrate their lack of restraint and consideration. One woman tazered another. Someone got stabbed defending his purchase outside a store. A number of fights took place over various items as they were placed on shelves. The "impression" foreigners must have gotten from the various melees was one of "primitive" behavior by Americans. Not sure how many of those shoppers are investors but with the light volumes on the various exchanges, one can assume many of them were. I will try to make sense of the data available to give my readers a possible advantage for their trading…
The March 30-year Treasury bond (CBOT:ZBH14) closed at 130 14/32nds, down 10/32nds or $312.50 per contract on Friday as recent talk from various Federal Reserve members indicated a "taper" of their bond purchase program may be in order sooner rather than later. We do not believe that with the plethora of "borderline" economic data and the ongoing U.S. labor condition that the Fed will act to cause rate increases. With the emphasis this past week on the retail sector, not much related to the overall economy was evident in the media. We continue to view Treasuries as in a trading range and would maintain strangle spreads.
The Dow Jones industrials closed Friday 16,086.41, down 10.92 points but for the month gained 3.5%. The S&P 500 closed at 1,805.81, down 1.42 points but for the month gained 2.8%. The tech heavy Nasdaq held above $4,000 closing at 4,059.89, up 15.14 points and for the week gained 1.7% and for the month tacked on 3.6%. As with the Treasury market, not much was said about equities other than the speculation as to how the retail sector would do on Thanksgiving and then again on "Black Friday" when shoppers went "wild." We will have to await the results of the holiday spending before assessing the value to companies. We continue to suggest the implementation of hedging strategies for holders of large equity positions. The "black hole" we see developing further could result in an even sharper correction than the 8-10% decline we have been awaiting. There is no need to "ride the wave" when the selling hits when a risk/mitigation strategy could provide a level of capital preservation.
The March U.S. Dollar Index (NYBOT:DXH14) closed at 80.885 down 3.7 points and aside from the Euro, the Canadian Dollar and the Japanese yen, lost ground against most of its trading partners. The Japanese yen closed at 0.9789 ,down 30 points while the Euro lost 15 points to close at $1.3559. The Canbadian dollar lost 16 points to .9395. Gainers included the Swiss Franc 16 points to $1.1040, the British Pound 82 points to $1.6346, and the Australian dollar 30 points to .9042. The lack of news and the shortened holiday week provided the backdrop for trading activity this past week. Look for higher volume and trading activity this coming week depending on economic data and any "words of wisdom" emanating from the U.S. Federal Reserve or the Eurozone financial community. Bear in mind the relativity between the U.S. and the Eurozone countries will continue to direct market direction. We continue to favor the dollar.