Monday, August 03, 2009

Monday Morning Musings: S&P 500 Tops 1000 Level

Back in the saddle after a nice vacation. Last week was a good one to miss, as the newsflow and price action was pretty slow. But investors are making up for it this morning, as the first trading day of the new month starts off with a bang.

The S&P 500 is rallying, and topped the 1000 level this morning for the first time since November 5, 2008. These big, round numbers tend to act as resistance the first time they are touched, so I would expect the SPX to consolidate around these levels for awhile before making any futher meaningful headway.

There was some positive economic reports in the form on an ISM Manufacturing Index reading that came in at 48.9, well ahead of the 46.5 consensus. That number is still shy of the 50 level which marks expansion in the sector. Also, construction spending for June rose a surprising +0.3% vs. expectations for a -0.5% decline.

Asian markets were mixed overnight, while European markets opened strong this morning. The dollar is lower today, which is helping boost commodities. Materials stocks are leading the action, with big gains in copper, steel, as well as energy stocks. the 10-year yield is higher at 3.65%, reversing a big plunge lower on Friday. And the VIX is higher to 26.18 after bottoming a week ago at 23.0.

Trading comment: I obviously was bit early in taking profits and raising cash. This stairstep market continues to frustrate most investors who aren't fully invested. But the sharp rise from the mid-July lows does not look sustainable at this pace, and I do expect more consolidation around these levels.

Aside from focusing on the major index levels, I will continue to look for trading opportunities in individual stocks and etfs, and will update the site with any trades. Currently, I am mulling taking some partial profits in our materials etf (MXI), which has had a nice run.

long MXI


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