The recent forced sale of Bear Stearns to J. P. Morgan, while spooking the markets initially, seems to have been the pressure valve that was needed. Market tensions had wound tightly wondering how the crisis would eventually pop the cork. This brutal, controlled uncorking seems to have eased pressures. The Fed’s Uncle Ben has shown that he is able and willing to use tools that folks had forgotten were in the Fed’s shop. The Treasury Sec visited foreign money troughs and invited them to invest in our weak financial institutions albeit with some gentleman’s agreements not to accidentally take over our country’s mismanaged financial houses.
So, looks like the sky is not going to fall after all. But, there will be dark clouds for at least months to come.
A look at the 6 month chart and you could easily convince yourself you see the beginnings of an upturn. But a glance back at November reminds us how easily the markets can bluff us.
I will remain in the S&P 500 tracking fund.
In my personal trading:
An option on Apple bought 3/12/08 is currently at a 20.6% gain.
An option on ValueClick (VCLK) expired worthless Thursday.
I am still eagerly learning to trade the Foreign Exchange markets. This month I have focused on the Euro/US Dollar (EUR/USD) pair. I have been able to increase the balance in the FX account by about 5% so far this month. This is a fascinating trade. If I buy the Euro when it is at 1.5440 to the dollar, and it rises to 1.5540, that is an increase of .0100, or 100 “pips”. The 1 lot trades I am doing yield a $1.00 gain or loss for each 1 pip move. A 30 pip move can happen in minutes or hours and generate a $30 gain or loss. To me, the secret of this trade, like most things traded is to limit the downside and take all the upside move you can capture. My current strategy is to limit the downside to 20 pips, and try to get 30 – 100 pips on the upside moves. (I also work this in reverse on the downside, selling high, and buying back low.) Generally, many of the financial actions taken in the U.S. have led to continuing weakening of the dollar. As the dollar falls, the Euro increases in comparison and I am able to profit from this spread.
This week I added positions on the British Pound/Japanese Yen (GBP/JPY), and the Australian $/ US$ (AUD/USD).
The focus on FX this month has distracted me from my trading of the Dow Futures contracts. My gains on that contract this month have only amounted to $25.00. However, after hearing sad stories from others who attempted to trade futures and lost large sums before giving up, I am happy to have gained the experience at no cost. I will be actively trading the futures again.
I noticed at the local gas station this morning that diesel fuel is $3.99/ gal. That will be reflected in the cost of everything we buy when we go shopping. The dollar rallied some this week, and oil and gold pulled back in response. But, since we are probably looking at a new administration not favorable toward big oil or domestic exploration, I suspect we will be looking at much higher oil prices next year.
In this morning’s paper is an article about a distant star blowing up, as all stars, including our Sun, are destined to do. NASA says it was so bright you could have seen it with the naked eye, had you been looking at the time. What is amazing to me about the story is that this star was 7.5 billion light years away. This means that the flash of its death, seen here this week, began its travel (at 186,000 miles per second!) toward us 7.5 billion years ago! One day, our Sun will do the same, and all trace of us here will be eliminated. Just as the Bible suggests, the earth will be destroyed by fire. Keep these distances and vast time periods, and destinies in mind when you start thinking about how significant we actually are in all of creation. While we fight over “critical issues”, the rest of the universe doesn’t even notice we exist.
Keep things in perspective. Have a good week.