Although the market ended the week on a high note, by trading up through the 1,335 level on the S&P 500 (SPY), macro news continues to be the catalyst for moves in both directions. In general, investors should be cautious when the market jumps around based on the latest piece of news from Europe. However, we have noticed some diverging dynamics in the "Risk Off" indicators that we review on a weekly basis.
In general, we are becoming wary of the obvious trade, which has been to sell risky assets because of the European crisis. The European crisis is not new, which means that more and more of it is being priced in. The upcoming market action will likely continue to be dominated by macro factors, especially the Fed meeting on June 19-20. Still, we are trying to decipher what is already priced into the market so that we avoid making the obvious trades.
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