Quite a Wild Ride
If the first trading day of 2007 is any indication...
If the first trading day of 2007 is any indication of the rest of the year, then we’re in for quite a lot of volatility.
At the open of trading this morning, the Dow popped 70 points higher -- on the way to scoring a 110-point gain by midday. The triple-digit advance came thanks to Wal-Mart Stores Inc. (WMT:NYSE), which surprised a lot of people with its holiday sales figures -- and Home Depot Inc. (HD:NYSE) which rallied on the news that its highly-compensated and under-performing chairman and CEO Robert Nardelli had resigned. (It’s always a strange sign when a stock rallies on the news of a CEO leaving, isn’t it?)
Further strengthening the upside was crude oil, which dropped 4% (or $2.55) to $58.60 a barrel.
But as soon as the gains appeared -- they also dried up. Shortly after lunch, a rash of profit taking hit Wall Street -- and with just over one hour left in the trading session, the Dow turned its 110-point gain into a measly five-point gain. What incredible intraday volatility!
If you can draw any conclusions from these wild swings, it’s that you need to be protected. That’s why Adam and I are currently holding protective DIA puts in our WaveStrength Options Weekly portfolio.
As you can see, all it takes is one intraday reversal (most likely sparked by the Fed minutes, which unanimously agreed that December inflation remained an economic risk -- adding that the economy was a “touch softer” than it had previously believed) -- and the Dow can precipitously drop.
So after one day of 2007 trading -- it’s clear we’re in for a volatile January -- and I’d rather see you protected than caught unprepared.