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Fear's Not Out of the Market Yet: Alec Levine

Posted Jul 07, 2010 02:08pm EDT by Chris Nichols in Investing, Recession, Banking
Related: ^dji, ^gspc, ^ixic, ^vix
Maybe the market has put in a bottom. Then again, as we know, maybe it hasn't.

What we can be sure about is that traders and investors are looking at every bit of data they can find to improve their chances of being right. For Alec Levine of WallachBeth Capital, he's seeing market participants remaining interested in guarding against a downturn.

Customers of his firm continue to be looking for protection, and they don't appear to be inclined to give up put options that would limit their losses and hedge against a decline in the market.

As guest host Jon Najarian notes in the accompanying clip, volume has pulled back recently, and that can spell trouble. Problems began when the sovereign debt crisis in Europe triggered volatility, and then liquidity dried up, Levine points out. Also financial regulation has been keeping traders on edge.

"When the global banks don't know ... what are the rules of the game, when they become questionable, well, people take their ball, and they go home," Levine says. "This type of legislative confusion is certainly not helping the market in any way shape or form."

The Wall Street crisis of 2008 was about leverage and derivatives, and that created sheer panic that spread around the globe. But is the sovereign debt trouble as big?

"It is as big of an issue, but it has less chance for a cataclysmic explosion," Levine says.

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