Monday Morning Musings

This is the type of action that makes me think Friday's rally was mostly short-covering, and without any big news over the weekend, traders are putting those short positions back on.

There isn't much in the way of news this morning, yet the market is trading markedly lower, with financials leading the way. South Korean regulators told the Korea Development Bank to take a cautious approach with regards to its potential acquisition of Lehman Brothers (LEH).

The one report that did come in today was the NAR existing home sales report. July sales rose +3.1%, higher than expected. But year/year home sales are still -13.2% lower, and have an inventory supply of 11.2 months. For 2007, the average inventory supply was 8.9 months.

Median sales prices are also lower, down -1.3% in July and -7.1% vs. last year. In the West, prices are down -22%. As I have said many times, there is still no sign of a housing bottom, and trying to predict one has been a fools game. There are a lot of wheels in motion to help us get there, and hopefully some time in 2009 we will be able to see some definitive signs.

Asian markets were higher overnight, following our Friday rally. The dollar is a bit lower this morning, as are oil and gold. Oil is trading near $114. The 10-year yield is also lower at 3.78%, a multi-month low.

Last week's trading was choppy, ending on a high note. For the week, the SPX fell -0.46%, while the Nasdaq 100 declined -1.33%. Volume has been running very light, which is normal for late August, and can exacerbate some of the price moves.

Technically, the SPX closed above its 50-day moving average on Friday, but is testing that support this morning. The Nazz is above its 50-day but below its 200-day, both of which continue to exhibit a downward slope.