Monday, February 09, 2009

Monday Morning Musings

There are no big earnings announcements or economic reports this morning, so the markets are awaiting news from the govt. about the various stimulus programs being discussed.

The Treasury (Geitner) was going to announce its bank rescue plan today, but they have pushed it back to tomorrow morning so that govt officials could focus on the economic stimulus bill. The Senate said the vote should come this week.

Separately, the Treasury said that the insurance companies will be eligible for TARP funds, and this is helping boost those stocks materially.

The dollar is lower this morning, which is helping boost oil and commodities. Oil is trading near $42, and the energy stocks are leading the action so far. Schlumberger (SLB) was added to Goldman's Conviction Buy List, and the oil services stocks as a group are up +4% on average.

The Baltic Dry Index, a measure of global shipping activity, rallied again and is up 10% today. This is helping the materials stocks, and helped boost China's market overnight. The other Asian markets were mixed overnight.

The 10-year yield is back up over 3.00%, for the first time since last November. This could be construed as a sign that the bond market is starting to look past the recession. Although this view is complicated by the fact that the Fed has said it could start buying long-term Treasuries to keep a lid on rates.

Trading comment: The market is lifting as I finish this post, and I am finally taking partial profits on some of my etf positions. Both the oil service etf (IEZ) and the ag. etf (MOO) have lifted nicely since I added to them a few weeks ago, so I want to lock in some of the gains.

The 10-day put/call ratio has fallen back to levels that have preceded market pullbacks in the past. It is now down to 0.83. The last couple of times it hit these levels, the market experienced a sharp pullback in short order. A couple of times this signal was a few weeks early. But I am leaning towards adding some hedges to the portfolios nonetheless.

less long IEZ, MOO


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