Software & Finance

Stock Market Trading - Market Reaction After Mid-Term Election, Fed

Nov 3, 2010,  CBOE Volatility Index closed today at 19.64 and this low level of reading indicates that no fear in the market. With reference  my earlier post - Good Bargains on Oct 22, 2010, VIX is almost flat. It also provides a nice opportunity to increase the short positions on stocks and commdoties.


Today after the Fed minutues at 2:15 PM EDT, Treasuries had a good sell off. TLT plunged from its intraday high of 102.27 to bottomed at 98.43 before it closed down 2.06 at 98.92. Many treastury inverstors might have disappointed with Fed Saying "Buying $600 billion government bongs by mid of next year". They might expecting the Fed might start buying bonds as early as possible perhaps in this year itself. The major disappointment caused a big sell off in treasuries which results in equites rally followed by sell off. Equities took advantage of sell off in treasuries. However this trend will change very soon and people will dump equities and move on the safe heaven dollar and treaturies. Here dollar is the key factor when it moves up and then commodities and equities sell off will accelerate.

I have given here my favorties picks below:

ZSL - ProShares UltraShort Silver

GLL - ProShares UltraShort Gold

ZSL is one of top favorite pick as Silver is overbought at current levels. We can expect a steep sell of in commodities. ZSL is good compared to GLL as Silver is more volatile than Gold.

TLT - iShares Barclays 20+ Yr Treas.Bond 
EDV - Vanguard Ext. Duration Treasuries 

TLT is good to buy below 100 from this current market conditions. Due Recent trigger in treasuries sell off, it may go down little more before it starts the powerful rally. You can wait for a couple of sessions to start buying. EDV is very good to buy if it goes below 80. 

UUP - PowerShares DB US Dollar Index Bullish

UUP, closed today at $22.12,  is less volatile compared to other leveraged ETFs and it is more suitable for conservative investors.

FAZ - Direxion Daily Financial Bear 3X
QID - ProShares UltraShort QQQ

We can expect a sharp sell off in technology and financial sector. It is ok to long FAZ and QID from the current levels. However be careful while trading with leverage ETFs.

VXX - iPath S&P 500 VIX Short-Term Futures ETN

Volatility to come back very soon as low level of VIX reading signals investors complacency.

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 Posted on Nov 3, 2010