Still Working Off Overbought Condition

Considering that the market moved deeply into overbought territory, and the SPX ran into resistance at its overhead 50-day, it should not be surprising to see a pullback here.

This morning, there are lots of cross-currents in the market. There was some good economic news, with productivity revised higher and unit labor costs revised lower. There were also some solid retail sales reports, including WMT, TGT, and many teen retailers.

On the flip side, military tensions are heating up between Israel and Syria, and this is helping push oil prices up over $1.50 to $77.25. And LIBOR is climbing for the 11th straight session to fresh 7-year highs. So the credit crunch concerns are still there.

The ECB met and left its lending rate steady at 4.0%. For its part, the Fed injected $32 billion of liquidity into our system this morning. The rate cut debate is intensifying, but I still believe they will cut.

The 10-year yield broke below the psychological 4.50% level yesterday, and is steady near 4.47%. Asian markets were mostly higher overnight.

The biotech stocks are the early leaders so far, followed by the energy complex. Homebuilders and brokers are lagging.