Markets and politics: Where are we going?

A review of yesterday shows the VIX closed at 43.68, showing the increased volatility I expected because of the approaching Options expiration today. The Fed took major action to buy back long term debt which caused an unprecedented increase of $60/ounce in Gold. The Put to Call ratio closed at 0.77 on Thursday, up from Wednesday's 0.65 closing level.

I think all in all it was a good thing the market pulled back yesterday because we were rising on a very rapid rate. Today I expect more volatility and while I can't predict today's market move, even though Futures are pointing for the market to be up today, I see the market continuing with this rally into next week and eventually over the Dow 8,000 level and the S&P 500 over 800 as well. The Dow closed yesterday at 7,400 after hitting a high during the day of 7,548 and the S&P 500 closed at 784 after reaching a high of 803 for the day. I believe this rally will end somewhere between 8,000 and 9,000 which is the range of where it has been previously. Because we went to the lows of 6,500 on the Dow I expect the rally to end between 8,000 and 8,500 and most likely not go higher until we have gone back and retested the lows.

Congressional action is the main unknown right now. The latest focus of their intellectual capital is on the AIG bonuses and outrage the voters have shown on this matter. They were caught, along with Tim Geithner, with their pants down, as in calculating which position they should take, they thought it better not to be sued over breach of contract for not paying the bonuses, than to pay them. They were all wrong. Mistake made, lesson learned and now, like adults, they all should get on with the issues on better oversight banking and insurance regulations, improving the economy, helping stabilize the banking system, managing healthcare costs, a better Energy policy which includes more Wind and Solar, as we surely have some whopper problems to solve as a country.