Monday Morning Musings

Good Monday Morning. The market is getting a big bounce, although news is relatively light. Banks stocks are leading the action, +6.0% so far, and those gains are being matched in the housing sector. Drugs stocks and biotechs are lagging, as well as a few large tech stocks.

The most positive news of the day comes out of India, where the ruling Congress party won a big election. India's stock market surged overnight, so high that the market had to be halted. The India etf (INP) is up +21% this morning, and most Indian stocks are up huge as well. Not bad.

In the bank sector, BAC was added to Goldman's Conviction Buy list. That is boosting BAC +12%, with most large financial stocks following suit. I still believe financial stocks are heavily underweighted in most manager's portfolios, and I speak from experience. We sold most of our financials very early in 2007, and have not yet added back to the sector in any material way, but I am growing increasingly bullish.

One of the catalysts behind the housing rally is that Lowes (LOW) reported better than expected earnings, and also raised guidance all the way out to 2010. Pretty bullish. The housing sector is another contrarian sector that is likely underweight in most portfolios.

Asian markets were mixed overnight, with many higher on the heels of India, but Japan was lower; oil prices are rallying back to $58, but gold is lower as the dollar bounces; the 10-year yield is up slightly to 3.13%; and the VIX is down -5.74% to 31.22.

Trading comment: I thought the market might dip to my SPX 875 level today, but it doesn't look like it so far. Friday's low was 878, which is close enough for govt. work. So far, it looks like you had to buy Friday's low if you wanted to play the bounce, but I suspect this bounce has further to go after a big down week last week (SPX -5.0%).

It seems like everyone is looking for a continued pullback, so I'm trying not to get micro-focused on the levels of the major indexes. That just distracts one from finding profitable trades, which continue to surface. I want to continue to trade around my stock and etf positions, buying pullbacks and selling rallies as long as this rangebound market holds up (which could be longer than expected).