Monday Morning Musings

The market is taking it on the chin in early trading this Monday, after some news out of Europe spooked investors, or at least triggered more profit taking.

The chatter coming out of the Group of Eight meeting is that the G-8 countries are beginning to look at ways to unwind their recent fiscal stimulus spending. Treasury Sec. Geithner said that it is too early to start withdrawing the stimulus, which is probably right. So far, this has mostly just been a big bounce in the markets from an historic oversold position.

Additionally, there were some comments from the EU that credit conditions remain a problem. European Union Industry Commissioner Guenter Verheugen said, "The credit crunch is still a problem and the longer it lasts, the more difficult it becomes for companies."

All 10 of the major sectors in the S&P are lower this morning. Actually, the only stock I have on my screen that is up at all is Visa (V), which was down a lot the last 2 days and is bouncing off its 50-day average.

Asian markets were lower overnight; the dollar is up again today, which is weighing heavily on commodities and energy/materials stocks; the 10-year yield is lower to 3.72%; and the VIX is spiking +7% back above the 30 level (30.25).

Trading comment: Only 2 days ago we had a test of the upper limit of the SPX 925-950 range, and this morning we are testing the lower limit of that range. That makes for quite a bit of volatility, but the market is still a bit overbought, which is likely keeping a lid on a successful breakout.

Volume was extremely light on Friday, offering little conviction either way. Big picture, the market has shown more volume on up days than down days, keeping the distribution day count relatively small. Until this pattern changes, I am still willing to give the bulls the benefit of the doubt.

long V