Checking in on the Trading Desks
1/24/03 11:46 AM ET
An observation or two I would share with you after checking in with a few of the desks on the Street. First, neither hedge funds nor large mutual funds want to commit much (or any) cash ahead of next week's four important events: Monday's Blix report, Tuesday's State of the Union speech, and of lesser importance Wednesday's FOMC meeting and Thursday's Q4 GDP report. And, of course, when there isn't anyone on the bid side, sellers take over and drive prices. That makes sense relative to the breadth and sector observations many have made over the last few days (e.g. defense names getting killed ahead of an imminent war). Selling has been broad-based and not panicky.
The second important point is that it has become official (too official in my view) dogma that any resolution to the Iraq issue (either via exile or the start of war) would cause an explosion of buying ("500 Dow points"). As a result, many players are buying calls aggressively to make sure they don't miss this event should it happen soon. That foots with the VXN and VIX readings that many have pointed out show complacency.
So we're between the Scylla and Charybdis here: no one wants to buy stocks outright but they all seem to want to participate in any explosive upside in the short term. No idea how this will play itself out, but thought you should know how big money is positioning itself.
Source: The Street.com
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