This week was a week of market volatility, retail woes, bigger bank woes, and an amazing story involving an airplane.  First, the VIX (click here if you don’t remember what the VIX is) or CBOE Volatility Index started at $42 on Monday and at its height Thursday was at $55 and ended today at $46.  Remember that during a healthy market, we see the VIX hovering around $10.  Not only is this number nearly 5 times higher than normal, but the swing in the number this week indicates that investors are uncomfortable with the state of the financial markets.  The good news is that it’s still down from its October high of $81.  For you advanced investors, if you would have bought 100 shares of the VIX (I’ve heard you can do it but never looked in to how as Scottrade doesn’t allow you to do it.) on January 7^th you would have made more than $1,200 if you sold yesterday.  Not a bad return for just 9 days invested.  Of course this kind of trade isn’t for the new investor due to the volatility.  The next market day is Tuesday.  Inauguration Day is one of those out of the ordinary events where we can’t make a highly educated determination of what will happen.  The market remains oversold so I’m still confident that we will get a rally any day now.

 

It was another bad week for retail and it isn’t going to improve any time soon.  Business Pundit, wrote an entry concerning Circuit City (http://www.businesspundit.com/) today talking about the liquidation of the electronics chain.  They announced today that all stores will be closing after failing to find a buyer.  This is the highest profile retail bankruptcy to date and most believe that Circuit City is only the first of many who will be victims of the recession this year.  Best Buy is now in a perfect spot to gain even more market share and the investor looking to capitalize on this would be well advised to get Best Buy on their watch list.  Right now probably isn’t the time to buy retail but as the sector starts to improve get a position in Best Buy.  Don’t miss it, though.  Watch the sector leaders for signs of recovery and invest early.  (By the way, I bought Walmart at its low and am well positioned when this best of breed retail stock starts it’s recovery.  I don’t think it will take long.)

 

Probably the biggest story of the week was the banking sector.  The bears have worked hard this week to drive banking stocks down and they did a fine job.  Probably the main reason the market was down was because of the banks.  The bears saw weakness and started a shorting borage that resulted in huge loses.   Morgan Stanley and Citigroup were able to come together and announce a merger which is a good thing for Morgan.  JPMorgan proved why the street loves Jamie Diamon.  They are truly the best of the worst in the financial sector.  Bank of America and Citigroup posted awful earnings and the government had to lend 20 billion to Bank of America because of its recent Merrill Lynch acquisition.  Finally, Citigroup split its assets today making two separate divisions.  Keep all of this in perspective.  One of these announcements should be a huge market mover but to have all of this in a week is truly historic.  This gives us a very good indication about how the market feels right now.  It was a bad week but not a catastrophic week in terms of the Dow and S&P.  Investors are expecting the worst and it’s already priced in.  Just another reason why I believe that the market is oversold and we have established a trading range.  We tested the 8000 level and were able to hold.  There was definitely a buy level down there which gave us a bounce when we tested it.

 

Finally, some great news.  This is barely financial news but worth writing.  Yesterday a US Airways aircraft was forced to land in the Hudson River.  If you have followed this story today you have heard phrases like “Miracle on the Hudson.”  We have endured a constant amount bad news lately.  It’s hard to be excited if you are covering the market but the fact that an extraordinary pilot with an extraordinary crew could do the almost impossible saving more than 150 lives is truly the feel good story of the first part of 2009.  I was refreshed that CNBC covered this story in such depth because we are in a market full of negative everything but they took time to highlight an extraordinary story.

 

Have a great holiday weekend.  Starting looking at infrastructure positions next week.  Get your watch list ready because we’re getting Obama.

 

 

If you’re new to this site, each Friday I provide a broad recap of some of the financial stories of the week.  This is also the day that I allow myself to add a little bit of opinion and get a little more technical for those readers who are not as new to the investing world.  If I write anything that you would like more clarification on, please feel free to e-mail or post a comment.  I would enjoy hearing from you.