The Economy Guy

Bonds prices went the opposite of stock prices, so bond interest rates ended at a very good position, with the 10 Year Bond ending at 3.75%.

Oil hit a near term low, falling almost $7 during the day, and ending down almost $6/barrel.  Gasoline also fell in price, but I still bet you haven’t seen those prices roll into your gas pump yet.  

The Dollar strengthened also to a near term high of $1.4391.  The dollar is now going to test a very important point in the technical curve, and the result will say whether the dollar strength is permanent or just a temporary rally.

Gold also fell in sympathy with oil and the dollar.  Gold could be another great buy in a few days – we’ll see if the market provides that opportunity.

In the news today….

Integrity Bank of Alpharetta, Georgia was closed by the FDIC late last Friday.  It is the 10th bank to collapse.  It had $1.1B in assets and $974 in deposits.  The bank had 5 offices in the region, and will be taken over by Regions Bank.  

Gustav missed New Orleans, and immediately the market showed that it had over-estimated the severity in cost of this storm.  The reaction was indeed a reaction.  Stock prices raced ahead as oil price plummeted.  The oil price action during the day suggested that the oil price could have fallen too fast, and too far.  Another storm would cause a retracement of today’s price action.  (And there are more storms out there.)

Lesson for today…..

It’s a slow day in the market news, so let’s talk about the volatility of the market.  During the summer months, people take vacations, and stock dealers are no different – they leave their desk when their customers leave on vacation.  Generally, the summer months have less volume (number of stock traded) than during the rest of the year.  Another slow time of the year is around Christmas and New Year.

A low trading volume can turn into a high volatility – and that’s what we’re seeing in the markets.  It won’t be until a little later this month that normal volumes will return.