Monday, January 26, 2009

Monday Morning Musings

The market got a nice lift in early trading after a couple of better-than-expected economic reports. The Leading Indicators for December increased +0.3%, much better than the -0.2% decline expected. Also, existing home sales for December rose +6.5% month/month, vs. the consensus of +2.0%.

These are both welcome developments. I view the leading indicators report as a proxy on investor and consumer confidence, and the lack of confidence is as much at the heart of this credit crunch as anything.

We also got a mixed batch of corporate news this morning, including a fresh round of layoffs, including Catepillar, Pfizer, Sprint, Home Depot, ING, and Phillips Electronics:
  • Pfizer (PFE) and Catepillar (CAT) both lowered their profit outlooks for the year, and their stocks are down. PFE is also acquiring Wyeth (WYE) for $68 billion in cash and stock.
  • McDonald's (MCD) reported solid earnings, and its stock is slightly higher
  • GE had its AAA rating affirmed by S&P, which is helping its stock bounce just a little after Friday's drubbing
  • In Europe, financials are trading higher after Barclays (BCS) moved up its earnings report to Feb. 9th to help calm investor concern

Oil is trading higher this morning, above $48, which is helping the energy sector. The dollar is weak vs. the Euro, which is also helping commodities. The 10-year yield is higher again to 2.66%, right at its 50-day average. And the VIX is -5% lower, breaking below its recent uptrend line, a good sign.

Trading Comment: The oil services ETF (IEZ) I added to on Friday is having a nice morning, as is the ag etf (MOO). Both of these have now broken above their 50-day averages, which should give them a little open field to run. The market is also still oversold, so if the overall market can also rise, that would be a big help.

On my short bond etf (TBT), I am taking partial profits this morning. That position has rallied roughly 5% from my buy point, which is a nice move for a bond position.

As for the market, the S&P is struggling with the 850 level again, which is an important resistance area. A close solidly above this level would be a bullish sign for a continue run higher. Bearish sentiment increased last week, a good contrarian sign, and with month-end this week we could possibly get some window dressing too.



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