Rumblings In Europe

Spanish and Italian bond spreads are widening in Europe this morning. After spending most of March under 5%, Italian 10 year bond yields are 5.3% this morning. Its starting to look like we could see a third year in a row of drama in Europe during the Summer.  The market has basically gone up in a straight line for months and will likely use this as an excuse to correct at some point.

My thinking has been that a correction was likely to start somewhere between April option expiration and the Facebook IPO in May. We are seeing weakness this morning continuing from yesterday, partially as a result of European headlines and partially because the market is so extended. The reason I kept put spreads in place was because I recognize the possibility that a correction starts earlier than I am planning for. I still think its unlikely we see significant weakness before April option expiration, but with protection cheap it still makes sense to play it safe.



dadzers said...

thanx for all your insightful commentary, chag kosher v'sameach

Tsachy Mishal said...

Thank you and to you as well.