Monday Morning Musings
Good monday morning. Nice start to the week, and the month, even though its still very early. Stocks surged in the last hour of trading on Friday, and that buying pressure has continued from the open this morning.
There was a batch of better than expected economic news that helped things this morning. The ISM Manufacturing Index came in at 42.8, and has now improved for the last 3 consecutive months. Construction spending for April also surprised, coming in at +0.8% vs. expectations of a -1.5% decline. And personal incomes increased +0.5% in April, better than the -0.2% expected decrease.
The positive tone in the market has pushed the S&P 500 to its highest level since January 6th. We would need to see a close above SPX 944 to register a new yearly high. But let's not forget about the Nasdaq, which is leading the way this year, and is at its highest level since October 2008, nearly an 8-month high.
In other news, Dow Jones has said that GM will be replaced by Cisco (CSCO) in the DJIA, and that Citi (C) will be replaced by Travelers (TRV), effective June 8th. I can see the CSCO addition, but I am a little disappointed that someone like Visa (V) wasn't added, as opposed to another insurance company.
In overseas news, China reported that its PMI (manufacturing index) hit 53.1 in May, which boosted global commodity prices overnight. The MSCI Asia index rose +2.8% overnight, led by a 4% spike in Hong Kong.
The dollar is mixed this morning, with oil trading higher but gold prices soft; the 10-year yield is back up to 3.65% today; and surprisingly the VIX is also higher at 29.26, after plunging back below the 30 level late on Friday.
Trading comment: I am still happy with all the positions we have added in the last month or so, although I am kicking myself for not getting back into the oil services etf (IEZ). That one has been on a tear. Our MXI is also doing well, but I have not taken any profits just yet. URBN also looks like it could be breaking out today, as well as FWLT.
I promised to write up what the sentiment indicators look like currently, and I still plan on doing so. Suffice it to say that I would have expected this 3-month rally to have brought out more bullishness, but that has not been the case.
long MXI, FWLT, URBN, V
posted by J. Kahn @ 7:54 AM
3 comments
3 Comments:
more bullishness ? more ? how can we have more bullishness than what we are seeing today ?
I mean more bullishness in the investor polls. sometimes buying comes from short-covering, which doesn't really reflect bullishness, just risk mgt.
I'll expand on this when I post my sentiment update--
Hello Jordan,
2 questions :
1) if investor polls aren't bullish isn't that a contrarian indicator i.e. bullish ?
2) also i'm assuming you believe today's activity (June 1) was mainly short covering, is that a correct assumption on my part ? if so, then i am curious to learn how you were able to determine today's activity was short covering as oppossed to folks increasing their long positions ? are there some indicators you look at that tell you this ? if you i'd be interested to learn what they are. Thanks.
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