This market will make you work

by Adam Beaty

Today the market felt the pain of world news. Right now China is worried of slowing economic growth, Italy (like everyone else) has a growing debt problem, and Greece is still lost. Unlike the declines we've had recently we've seen a shift from normal selling to more fear. The VIX (fear index) is up 15.3% which is still in normal control. The VIX likes to range from about 15 - 20 and anything outside of that you are moving to more extreme levels. Last Friday the market reported not bad but horrible numbers which closed the markets in red but the VIX had barely increased throughout the day. We are also seeing a flight to safety throughout the different markets:

• GLD is up .89% (flight to safety)
• DIA had the last amount of loss today (big-caps = flight to safety)
• IWM (Russell) had the biggest loss today (moving away from speculation)
• Safe Sectors were strong: Utilities and Health care
• Money moved out of Financial and Energy
• People were not selling puts today

On that last point - at the beginning of June the markets saw a lot of put selling which was (in my belief) crushing the VIX at the time. Put premiums remained low in June even as the markets began to fall. Today on the other hand premiums are at a high as there are more buyers than sellers.

Currently the market is testing the 50 and the 100 day moving averages. On top of that we have also pulled back to the top of the downward channel (not shown in chart). If the market continues to sell off then I would expect a test of 1300 and then the 200 day moving average, currently at 1273. Be cautious in your trading. This is a very unstable market that makes it harder to predict. The market should not be moving in jumps or swings of +1%. The market is heavily news driven right now which is making the next day more unpredictable than the last.

Just a side note, we have started the new earnings season in which AA just reported mixed/bad news. I don't think this will effect the market since our focus seems to be overseas. However, please be careful holding positions. Make sure you know when the report earnings and also take a look at their competitions earnings date. Holding over earnings is a gamble that is not worth the reward.

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