Friday Outlook: Two-Way Volatility Continues

by: David Fry posted on: February 22, 2008 | about stocks: DVY / EEM / EFA / EWA / EWC / EWZ / FXI / IEF / IFN / IWM / MDY / QQQQ / RSX / SHY / SPY / TLT / UDN / USO / UUP / XLF / XLY    
Stealth? Well, if you read John Cassidy’s article posted at Portfolio.com, you’ll get a sense of what’s “really” going on behind the scenes. It links obliquely to what we wrote about yesterday regarding re-rigged CPI data and the “look left, run right” manner in which the government is operating currently.

Look, there is plenty of logic that argues that officialdom just can’t let the financial system break down completely. But, there’s a price to pay beyond “Moral Hazard” issues and that tab looms in the future.

The two-way volatility continues with equity prices taking a major hit Thursday offsetting Wednesday’s comeback performance due to dismal economic data, primarily from a decline for a fourth straight month in leading economic indicators.

Thursday's volume was decent and breadth was much more negative than Wednesday.






Stepping back from the daily noise is our custom. Instead, let’s take a longer term view.







































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David Fry

David Fry

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This article has 3 comments:

  •  
    jack kreg
    Feb 22 12:01 PM
    US dollar is finding some form of bottom at 76, on the USD index that you have graphed. In 2.5 years, it has dropped from 90 to current levels. One would think that it must be putting extreme pressures on industry in Europe, hence a weakening their economy and causing eventual interest rate cuts. The interest rates cuts would presumably weaken the EU and stimulate consumer growth.
    So, does this support the idea that the dollar is making a bottom, which may last for a few years? thoughts?
  •  
    Robert S
    Feb 22 02:59 PM
    What do you mean by negative yields (in the comments for SHY and IEF)? Do you mean relative to something like SHV?
  •  
    David Fry
    Feb 22 03:17 PM
    Jack, if you look at the weekly chart posted you'll note how many times we've seen this pattern during the decline. Think of it as a series of steps lower which I've posted before. Fundamentally, I don't know what's to like about the euro vs the dollar at these levels but let's face it the dollar may be losing its reserve currency status.

    Robert,

    When eroded by current inflation the yield on IEF is negative.

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