Traders are betting that the global level of volatility and uncertainty is declining. It's a big bet. What to do?
On the surface, there are several pieces of news that can be spun positively today:
2) Hopes for progress on the Japanese nuclear crisis
3) Libyan no-fly zone
4) banks raising dividend, and two repaying TARP and selling stock.
Still, the first three events could still blow up or reverse easily. That's why many traders I have talked to are either de-grossing, flattening out, or buying hedges.
"Stay flat, too much headline risk," one trader wrote to me. "So much news.....traders need to be hedged, cause so many unknowns," another said.
Still, I know many that are moving their positions around, not getting out. Two big trades:
1) out of high beta tech into financials. Traders note that many popular growthy tech names have been getting crushed: F5 Network , VMWare SalesForce.com , Acme Packet , and the networkers (CIEN, FNSR, JDSU).
And financials?All up as they announce not just dividend raises (which were long anticipated), but even capital raises. It's a Friday afternoon, folks...when was the last time you saw two big banks announce capital raises on a Friday? SunTrust with a $1 billion offering, KeyCorp (KEY) with a $625 million stock offering. Yes it's to repay the TARP, but both stocks RALLIED on that news.
2) keep buying commodities and big cap international industrials, as they benefit from rebuilding and unrest.
Look at Caterpillar pennies from an historic high ($105.86 is the intraday historic high on Feb. 18).
The bull argument:
1) Japan nuclear: unstable but improving
2) Libya: situation nearing its end
3) Bahrain: protests viciously put down
4) Saudi Arabia: no threat of significant protests.
5) Europe: few headlines at the moment.
I know — all this could blow up again. But traders seem to be willing to roll the dice, and get out quick if they need to.
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