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The WCR’s
Mid-Year Review & Outlook
By Head Analyst James
Mound
July 20th, 2008
General Market Overview
The first half of the year started with extreme market
volatility spurred on by major fund buying and a spectacular commodity bull
run. However, as in most market rallies, the turn was even more severe than the
rally. Then about the start of the second quarter something unexpected happened
(well unexpected for me at least). The volatility that was so prominent for the
first three months of the year fell out of the market and only reappeared a
handful of times throughout the quarter, just enough
to tempt traders to play overpriced options and suffer a major volatility decay
in their respective premiums. The year has begun as one with wild swings in
underlying volatility and epic commodity price moves. It has been furthered by
global commodity shortages and fund buying. The only question that remains is
will it continue?
I remember when the Gulf War began and oil prices spiked to
nearly $40, but almost to the day of our troops hitting the desert sand the
market reversed and put oil on the road to $11 prices (man that seems like a
long, long time ago!). The point is that the market’s psychological tendency to
buy the rumor and then sell the fact is repetitive throughout history and now
is no exception. Is the economy at its worst point? While the answer is likely
no the expectation is likely at its most severe fear level. The fear level will
diminish as the economic downfall is realized and the stock market and U.S.
dollar will benefit from a more even view on a global perspective. This is not
a U.S. problem, but rather a global problem that has seen the
first hit taken by the U.S. When the market perceives a more beneficial investment
scenario in the U.S. as opposed to abroad the market will correct. The same
holds true for oil and grains.
To read the full 9 page
Mid-Year Review & Outlook
CLICK HERE – then click on Article 45
under the Featured Articles Sub Header
