Thursday, August 06, 2009

Light Profit Taking Despite Lower Jobless Claims

The market started off higher, but has since slipped back into negative territory as profit taking continues. Yesterday's decline was not bad, and despite the overbought condition of the market, the profit taking feels pretty benign so far.

Cisco (CSCO) reported solid earnings last night, but given the run we've had, even that news isn't enough to continue to propel the Nazz higher. CSCO is down -0.5% today.

Initial jobless claims came in lower than expected at 550,000 vs. 580,000 consensus. As signs of the recovery grow, hopefully corporations have slowed job cuts. Tomorrow's monthly payroll report will be a closely watched event.

Retailers reported generally lackluster same-store sales, but the retail etf (XRT) is higher nonetheless. A few companies, including Gap, Kohl's, and Macy's issued upside guidance, and those stocks are nicely higher. URBN is up +9% today to its highest levels since last October.

There were also gains overseas as Asian markets rose overnight, and the Bank of England made a surprise decision to expand its bond purchase program while leaving its benchmark interest rate unchanged at 0.5%.

The dollar is higher this morning, weighing on commodities (oil, gold, etc); the 10-yr yield is steady at 3.76%; and the VIX is slightly higher to 25.43.

Trading comment: The market looks a little toppy here. It could be that we just get another sideways consolidation before another push higher, or it could be that we get more of a deeper pullback. It's hard to say ahead of time, which is why I closely monitor the daily price/volume action in the market.

I am still net long, but have a somewhat elevated cash levels relative to "normal" allocations due the the profits I have taken recently and my cautiousness about reinvesting those profits in new areas. I would really like a pullback in the financials to add to BAC and GS, but those stocks seem to power higher on a daily basis. Ditto for RIMM, which looks to be in good shape again. So far, no trades today.


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