The market was weak in early trading, although it is bouncing back toward positive territory as I write this. This morning's ADP Employment Report
showed more job losses than expected (-298k vs. -250k consensus), but second quarter productivity was revised higher while unit labor costs were revised lower. The positive inflation implications didn't have much impact on trading.
Yesterday the market was down sharply, despite the strongest ISM Manufacturing index reading (52.9) in 18 months. The bears will jump all over this, saying that when the market doesn't respond positively to good news, it means we are headed lower.
I won't necessarily argue with that, although I would add that we are overbought and due for a pullback. So yesterday's action wasn't all that surprising to this observer. But at this point, I think it is still likely that the pullback will be mild. I think bearishness will spike again, and underinvested PMs and hedgies will look to put money to work ahead of a possible year-end rally.
The dollar is lower this morning, helping commodities, but gold is the standout of the day. Gold is spiking higher, above $965, and staging a nice breakout on the charts. I have been patiently long the gold etf (GLD), so today's action is welcome.
Asian markets were lower overnight, except for China which bounced; the 10-year yield is lower again, now down to 3.35%; and the VIX is roughly flat near 29.15.
The VIX was the chart of the day yesterday, as it spiked +12% higher on a surge above its 50-day average. This was the highest close above its 50-day since the rally began back in March. If the VIX is contained around these levels, I won't worry too much. But if it continues to break above the 30 level, it could mean we have to be on the lookout for another nasty bout of selling.