/ 23 June 2010

A bit of a breather

With the four-day week last week, the JSE still managed to edge out a 3,4% gain in what was a very quiet session. Even the usual mayhem of futures closeout on Thursday, didn’t provide much activity and we were left wondering how to position ourselves for the week ahead, and what the catalyst was going to be.

The bad news out of Greece and the Eurozone seems to have been brushed aside for now and one can’t help but feel that it is going to pop up again when we least expect it.

The sentiment certainly seems to have changed and most of the global markets shrugged off what was some pretty bearish economic data, and chose to rather focus on the Spanish pledge to stress test its banks and the Chinese government implying that tit was going to let the yuan float more freely.

All these added to the positive sentiment of the market and it certainly implies that financial markets appear to be stabilising somewhat.

The VIX has taken a big smack over the last few trading sessions and is now down below 25% and is starting to look reasonable. Time to probably buy downside insurance as the market is once again looking for risk and higher yields, evident also in the rand back below 7,50 to the dollar.

We have pretty much sold out of all our longs and have been sitting on cash until we get some sort of direction. I’m inclined to think that after six up days out of the last nine, the market is probably due a bit of a breather and we will start to place some shorts at the higher levels.

Some decent numbers out of the United States later on Tuesday should give some volatility back. After running a few numbers, some of our retailers look a little expensive and that would probably be one of the high conviction trades for now. But besides that, we continue to sit mostly in cash and wait for some opportunities to arrive.