Tuesday, August 07, 2007

Market Recap

What a day ! Talk about volatility. First time in a while we have not closed 3 digits in one direction on the Dow. But we moved 3 digits in both directions throughout the day. The bears took control after the Fed announcement to drag the market down over 100 points. Then the bulls staged a comeback of their own, turning around the market over 250 points to the north. Then we weakened a little into the close though traders made money today. Lots of money from the volatility. Option traders made bank.

Oil, housing and utilities were the strongest sectors while semiconductors were the weakest. In the industry groups, home construction, coal and media agencies led while insurance brokers, platinum and precious metals lagged.

Today was a great opportunity for the bears to take the markets down. The FOMC comments showed no signs of softening. Inflation is their key priority. Despite the sustained harsh tone, the bears were unable to take advantage despite dropping the Dow down 140 at one stage. After a day like this, long is the way to go.

Former Brocade CEO Gregory Reyes was found guilty on all charges of option backdating. "I didn't know the law" is no longer an excuse. Steve Jobs watch out !

Going long the double inverse oil and gas ETF DUG might be a good bet here. Oil and gas stocks have a tendancy to weaken around this time of the year till the early part of the following year.
I would hedge DUG by being long UNG which is the natural gas ETF which tends to spike September ownwards especially around hurricane season.

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