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Fingers crossed for week ahead

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by Peter Switzer

With the US gauge for market fear — the VIX or fear index at 36 — it means we should expect volatility this week but I can’t see it being as bad as last week. Gotta cross your fingers.

I know some investors with technical experience say it could be a good week ahead but I can’t get excessively bullish for the present.

In case you missed it, on Wall Street they had two positive finishes in a row and the Dow was up 1.13 per cent on Friday, down only 1.53 per cent for the week, off a big 7.2 per cent for the month and down 2.66 per cent for the year to date.

The Yanks were overdue for a correction — a 10 per cent fall — and they have had it and let’s hope clawing back will be the preoccupation of markets going forward.

A worry is that last week’s wild swings were like the ones seen when Lehman Brothers collapsed in September 2008.

Main game

I think we now watch the US economy and hope it progressively picks up and the main anxiety game will be Europe. Bans on short-selling in a number of countries will buy time but it’s no fix. However, the rumour-mongering involving French banks and France to lose its AAA-rating calls for it while the European leaders lift their debt management game.

The meeting this week between German Chancellor Angela Merkel and French President Nicolas Sarkozy will be important for market direction.

You have to be worried about US consumer confidence at a 30-year low, but considering what has been happening lately, it’s understandable. Against that, retail sales were up in July — the best rise since March! That’s a conflict you would only see in economic data.

Out this week

This week there will be important US economic data, which will give us an idea on the economy’s health. They include the Empire State Manufacturing Survey, the Housing Market Index, housing starts, industrial production, inflation readings, existing home sales, the important Philadelphia Fed Survey, leading indicators and a range of company reports.

Unfortunately, it could be too early for the US economy to surprise on the upside and so we have to keep our fingers crossed that the Europeans will surprise us and act in a way to impress the market. I want to believe in these guys, but history makes it pretty hard for me. I will give them one more chance.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Monday, August 15, 2011

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