Tuesday, March 6, 2012

Quick update

Just got in from a long day and, in a sense, I'm happy I didn't sit thru today's sell off.  I stated in my commentary this past weekend that we were liable to see a sharp sell off that would provide a buying opportunity toward the end of the week.  Well, it came a bit early.  The media tried to explain the sell off due to a combination of issues, from the Iran crisis, to Greece, to weakness in China.

The key to today's sell off was the price action in Gold.  If the market was concerned about Iran Gold would not have plummeted $32.00+ today.

Clearly, the fears surround a "credit event" being declared by the ISDA (International Swaps and Derivatives Association)which would trigger Credit Default Swaps on Greek debt.  The immediate concerns have to do with counter party risk; who's doing the insuring and do they have the money to deliver the insurance when these instruments are triggered.  When Lehman failed in 2008 and these instruments were triggered people stopped answering the phones when these swaps were called in.

We're back to "risk off" due to Europe again and we're liable to see more weakness as the week goes on.  But watch for Friday's Employment report.  If the market senses any stabilization with regard to Greece and we get a good report, stocks will come roaring back.

I'll have more tomorrow and Thursday night.