IMF Says Global Economy Improving

The market was higher in the first hour of trading, but is currently back in negative territory. This comes despite some positive comments out of the IMF, as well as a couple of solid earnings reports to kick off this quarter's earnings season.

The IMF upgraded its outlook for the global economy, and said it expects it to expand +2.5% in 2010. Some of the skepticism among investors might stem from comments out of the G8 meeting, where participants said they believe the global economy still faces risks and could need more help.

Earnings season officially kicks off today, and the first two reports from Pepsi Bottling (PBG) and Family Dollar (FDO) were better-than-expected. Healthcare stocks are bucking the weakness so far, being boosted by positive drug news out of Amgen (AMGN), which is boosting its stock.

The exchange stocks (CME/ICE) are under considerable pressure, as the CFTC is weighing options for implementing position limits in the futures markets to deal with speculation. This is likely weighing on the overall financial sector as well, as big trading outfits like Goldman Sachs(GS) would also be impacted.

On a related note, oil is trading lower for a 6th straight day, leading to further losses in the energy sector. Although materials stocks are not down as much.

Asian markets were lower overnight, despite news of improved consumer sentiment in Japan; the dollar is mixed right now vs. the Yen and Euro; the 10-year yield is falling further, now down to 3.40%; and the VIX is +3.5% higher to 31.93, breaking above its 50-day and signaling a pickup in volatility.

Trading comment: Yesterday's session was ugly, but volume ran lower than the previous day on the NYSE, thus avoiding a distribution day. This cannot be said for the Nasdaq, which suffered its 2nd straight day of distribution. There is a lot of chatter about the head and shoulders top patter in the market, and right now I feel that this is becoming a self-fulfilling prophecy.

But as the S&P hits the 875 level that has been a key level to watch, I still expect a bounce in the near-term. This is why I took some partial profits on my shorts/hedges, and am looking to add to my long positions into this weakness. I expect the summer months to be choppy, and will try to take advantage of the trading ranges as they develop.

long GS