monoblog

Something unique is happening in the stock market... The volume is nearly double what it normally is for the Dow Jones Industrial Average. Look at the right-most portion of the volume graph below:

As you can see, the volume starting in July '07 is nearly double that of pre-July. This is most pronounced on the S&P 500 and DJIA, but not as much on NASDAQ. While I already knew that credit concerns are increasing market volatility, I hadn't noticed that the volume has surged until today. My guess is that the fear of credit problems spreading into other markets has brought out dormant investors. I think if the Federal Reserve lowers rates or keeps rates the same (as it just did recently), market conditions will bode well for Treasuries, TIPS (Treasury Inflation Protected Securities), and gold. The only problem is that the yield curve is not curved — it's flat. And gold lately has been reacting similarly as the dollar. Does anyone know of a good investment right now, besides a fund that shorts the market?

In case you aren't worried about the stock markets yet, read this article. The problem of excess borrowing is being "addressed" by the central banks by infusing even more cash into the system. Call me crazy but it sounds like adding fuel to the fire... I think I'll be placing my order for gold and silver soon.

Update: The rise in volatility has been partly blamed on the SEC repeal of the uptick rule. The repeal will allow short sellers to more easily profit when stocks fall.

If that isn't enough to make your stomach churn, consider these articles: a mystery options trader is betting $1 billion that the global markets will crash by 30% by the third week of September. Some traders are betting that there will be a 52% decline. Some people are calling these "bin Laden trades", as they indicate that there is another attack pending. September 11th does fall inside the window of these trades, which makes this speculation all the more interesting to follow.