Small Bounce For Stocks In Early Trading

The market is getting a small bounce in early trading. Tech is mostly higher, while energy and utilities are lagging.

Yesterday's bounce came on lighter volume vs. the previous day, which was a high volume distribution today. Usually you want to see the reverse - rising volume on rallies and declining volume on pullbacks. So I am still in the camp that expects more of a pullback, but I am still watching that SPX 875 level for initial support.

The Treasury reported this morning that it will make $22 billion in TARP funds available to several life insurers, but the stocks are lower at the moment. This could be a little 'buy the rumor, sell the news' effect, but I admit I am a little disappointed by the reaction.

In economic news, CPI was flat month/month, and down -0.7% year/year. Capacity utilization rose a touch to 69.1%. I don't think we can start worrying about inflation until capacity utilization gets above 80%, which is likely years away. And the Empire Manuf. Survey rose nicely to -4.55 from -14.65 last month.

Asian markets rose overnight. In Europe, reports showed that GDP in the euro zone dropped -2.5% in the first quarter, marking the fourth consecutive quarter of decline. The dollar is up today, but gold prices are up also. Other commodities are mostly weak. The 10-year yield is up to 3.13%. And the VIX is at new lows for the year at 30.85, levels we have not seen since September 2008.

Trading comment: Yesterday I took profits on our SSO position, and partial profits on MOO. I still like the ag space very much, and will look to use a pullback to buy back into it. I also like the insurers on the TARP announcement, and will be looking for a spot to add KIE. I didn't pull the trigger the other day on RIMM, although I should have, and would still like to buy that one near $70. I also recently added VMW to our accounts, and still like that one as well.

long MOO, VMW