10.03.2011
By Markets Media

Economy and Markets Teeter

Markets are in the doldrums and the sell off continues as global equities take a huge hit.

Over the weekend, Europe’s ongoing debt crisis worsened as investors and central banks realized the true magnitude of the situation at hand. This time, it’s not just Greece; multiple EU-based nations are on the hook for billions of dollars and will ultimately require a bailout from the International Monetary Fund.

Early Monday morning, the futures and Asian markets were already an indicator that this week would not be a positive one for U.S. equity traders – especially those who continue to be long. For the past two weeks, the consensus among traders was: sell the rallies. That manta has proven very lucrative to those who stuck to their guns considering that the S&P closed below 1100 and the Dow Jones Industrial Average is fast approaching the 10,000 level.

Some market participants are hesitant to buy until the Dow hits the 8000-9000 level and the S&P is below 1000. They may soon get their wish. Multiple percentage point dips are common for intraday trading.

Volatility traders and market makers are also enjoying the current climate as the CBOE Volatility Index (VIX) shot past 44 points when less than 3 months ago, the VIX was hovering around 15.

Lightspeed Financial Chief Executive Steve Ehrlich summed up what most investors think of the current policies of the Federal Reserve via Lightspeed’s official blog: “The Fed also needs to take a little blame for the plunge. It’s so called ‘Operation Twist’ announced on Wednesday only served to deepen investor fears. This tactic of increasing short term rates was a vain attempt to lower long term interest rates.”

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