Wall Street started the week in red territory as European debt woes stole the headlines and put investors in a gloomy mood. Investors are very fearful that Italy’s financial health is seriously deteriorating, and if no grand solutions are conceived in a timely manner, then it might be too late to bail out the country if it comes down to it. As expected, gold opened higher to start the week and the precious metal continues to climb, managing to post gains every single trading session since July 4th, 2011.
Tuesday was a fairly quiet day for the markets as investors digested the first round of corporate earnings reports. Alcoa’s earnings slightly missed analyst expectations; however, the aluminum giant did post impressive revenues as well as offer positive forward-looking guidance. The real action started a few hours before the closing bell as equities sold-off following Moody’s most recent downgrade of Ireland, putting the country’s credit quality into junk territory. Investors quickly retreated to the safe havens and gold rallied close to $40 into the close. Wall Street rallied on Wednesday as investors digested Chairman Bernanke’s commentary about the ongoing recovery and subtle hints of another possible round of stimulus. Amidst all of the ongoing uncertainty still plaguing financial markets across the globe, gold soared to record highs and futures prices hit $1,588 an ounce.
Earnings season is upon us once again, but unfortunately the stock market remains largely driven by headlines. This week’s recommendations have put us in a sweet spot, allowing us to reap the benefits of a broad-based equity market rally, while also holding a key defensive position within the fixed-income space.
Checking In: Trading Ideas
This week, our trading ideas included long positions in two foreign equity funds, as well as a recommendation to long U.S. Treasuries, in a “defensive” effort to protect against rampant volatility. Discerning news from Italy coupled with Ireland’s downgrade sent waves of selling across both European and domestic markets, putting our equity positions in red, but tacking on gains to our defensive holding:
Trading Idea #1: Long TUR
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