On Friday, I closed some of my positions as I thought we were hitting bottom due to high level of VIX and a short term capitulation.
- The market managed to recoup the losses and the VIX collapsed again, while it was a Friday, and speculators seemed too happy to load up on risk during the week-end
- There are too many people calling a buying opportunity still
- The US has been downgraded, and I do not see enough reaction besides emotionally charged anger against S&P.
- Gold and silver are soaring, showing that the "risk on" trade is moving from equities and other commodities into the precious metals.
- ECB's Chairman, Trichet has decided to monetize Spanish and Italian debt, although this is illegal and highly inflationary, the Euro is rallying, showing yet again, that the über-bullishness on the Euro is not deflating, while the economies of the Eurozone are collapsing.
- [Update] Goldman Sachs just downgraded their forecast for the S&P... they expect the S&P to end the year at... 1450 points! That's 20% gain in about 5 months... Call that panic and bearish?
- [Update2] Barry Knapp of Barclays Capital tells on Bloomberg TV that he doesn't change his forecast for the S&P to end the year at 1450. He calls this decline a tremendous buying opportunity, and says that stocks are extremely cheap.
- Aug. 8 (Bloomberg) -- The combination of the past two weeks’ $1.94 trillion equity wipeout, record cash levels and rising dividends means the Standard & Poor’s 500 Index is offering comparable values to Treasuries.
“Many corporations are in better shape than even the United States,” E. William Stone, who helps oversee $109 billion as chief investment strategist at PNC Wealth Management in Philadelphia, said in a telephone interview Aug. 6. “These companies are in a position to weather pretty much any sort of financial storm. Hopefully we won’t see that again. It certainly would argue for that tilt towards larger, stable companies with sustainable dividends.”
So I'm lost a bit here. I think the most likely scenario is a few more days of decline — I'm happy I've kept my short positions open — before the relief rally and the bounce that I will short.