Monday Morning Musings

The market opened mixed, but has since turned higher in early trading. One the one hand, the market may be beginning to bounce after last week's declines, and ahead of quarter end. On the other hand, we do have both bond yields and oil moving lower this morning, which is also helping improve sentiment.

The yield on the 10-year is down 5 bps to 5.08%, and the chart looks like its forecasting more downward pressure. Oil is also easing, down more than a $1 near $67.80.

And China got walloped in overnight trading. The Shanghai Index fell -3.68%, a big drop. I tried to position for this with a short FXI trade, but the Chinese ETF isn't budging. As such, I am looking to cover my short trade. Frustrating.

The home sales report was fairly weak this morning. Home prices eased further, and the supply of homes on the market rose again. This is causing a bump up in the fed funds futures that predict the chances of a rate cut.

I still think the combination of the subprime mess, and add to it the Bear Stearns hedge fund blowup, gives the Fed good cover to cut rates later this year.