A Tumultuous Week
May 23, 2010
Posted by Jody Eisenman | Filed under Uncategorized
The stock and bond markets concluded one their wildest weeks in a long time. Almost every index jumped up and down like a leaf on a windy day. By the end of the week, the S and P 500 had lost over 4%, with the major decliners included the financials, commodities and emerging markets. A good indication of how volatile the markets have become was the trading of the VIX volatility index. The VIX, which bottomed below 16 last month, soared to over 40, after trading above 48 on Friday. The last time the VIX traded this high was over a year ago, right around the market bottom.
Clearly, the European debt crisis (and potential resolution) has driven markets, as traders reacted violently to any potential news. Although Treasury Secretary Timothy Geithner believes that this will not hinder a global recovery,
http://www.bloomberg.com/apps/news?pid=20601087&sid=azodJi50uU.U&pos=3
many traders feel differently. The question is, what’s next?
I honestly don’t know. I can see the market going either way here. What I do see is that the volatility will continue for the near future. In addition, I would be concerned about the skittishness of the market, which is now reacting with alacrity to any bit of news on the horizon. It’s a great trading market if you are savvy enough to call the tops and bottoms. As such, I would remain cautious until the picture becomes clearer.
