After posting strong early gains, markets finished the week in the red as weakness in the mining and technology sectors and concerns over Europe weighed on investors. “The pattern has been to sell into the weekend, wait for sovereign risk and sovereign default news in Europe, and if it doesn’t happen, the relief rally begins.” said Robert Francello, head of equity trading for Apex Capital in San Francisco.
The recent sell-off has pushed the S&P 500 down close to 7% in the past eight trading days and has reignited fears over a ‘double-dip’ recession. The ETFdb 60 index fell 7.32 points to close at 999.61. The index finished the month down more than 3% and has now erased all gains from the last two quarters.
The biggest decliner in the ETFdb 60 was Market Vectors Gold Miners ETF (GDX) which sank 3.4% in Friday trading. The sharp drop comes after continued fears regarding China’s efforts to reduce lending, the dollar’s strength, and speculation that Obama’s bank plans will cause many large firms to reduce their commodity positions. “Even more than the dollar’s strength, there are a lot of worries about banks and big firm’s ability to hold long positions,” said Zachary Oxman, managing director of California-based TrendMax Futures. “There is a lot of money tied up in buying gold, and you are seeing a lot of money come off the table now, as people are willing to take less risk at this point.”
The main beneficiary of this rocky market was iPath S&P 500 VIX Short-Term Futures ETN (VXX). The ETN saw its shares trend higher by over 2.0% to finish the week. VXX benefited from growing concerns about the economy in Greece as leaders met with EU officials in order to discuss how best to reduce the Greek deficit, which currently stands at 12.7%.
Disclosure: No positions at time of writing.