Home > Lessons from the trading floor > New Year, Uncertain Market!

New Year, Uncertain Market!

Well, after the first week of the new year complete it is fairly clear that nobody knows what to do, so instead they stay on the sidelines.  The volume was extremely low, not leaving many great trading opportunities. On the bright side, the extreme volatility has seem to come to an end for now.  The 500 point swings on the dow are just a distant memory.  During the week we had a 200 point down move that was slow and steady, nothing violent about it.

We had horrible news in the retail sector, holiday sales were as bad as they have been in 40 years. In addition unemployment was also near record lows, yet there was no massive sell off.  What does this tell us? It tells us that most people have accepted the worst and now have begun to hope for better results.  With Obama coming into office in just a few weeks, there is that hope that he can make the necessary chages to bring our economy back to where it needs to be.  We can only assume that is economic stimulus plan will pass through congress in some shape or form and give the american people a bit of extra spending money and also create some jobs.

On another note, the Madoff downfall is not completely through yet. Many hedge funds will more than likely be selling in the upcoming weeks as any investor who requested a redemption after the Madoff scandal had to wait 30-90 days.  This wave of selling could very well bring the market back to its lows.  So as traders we must continue to be nimble and be willing to change are opinion on market direction very quickly. We can expect the market to trade in a trading range with any news releases setting the tone for at least the first half of the year.



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