Monday, October 05, 2009

Monday Morning Musings

The market is getting a bounce this morning, after four straight losing sessions. Financials are outperforming (+2.3%) after Goldman Sachs (GS) upgraded the bank sector. Consumer staples are the only group in the red so far.

In economic news, the ISM Services Index for September came in better than expected at 50.9, which is nicely above August's reading of 48.4. The UK Times said that Britain's service sector grew at its fastest rate in 2 years during September.

Other than that, there is not a ton in the way of market moving news. There was no big M&A news over the weekend that I have seen, other than a rumor that Brocade (BRCD) could get bought by someone.

Asian markets were mostly lower overnight; the dollar is also lower, which is boosting gold prices slightly ($1003), but not helping oil much ($68.75); the 10-year yield is lower again, now down to 3.18%; and the VIX is also -4.3% lower to 27.44.

Trading comment: No trades on Friday or this morning, so far. The markets are still oversold, so I think they should bounce this week, and we are already seeing that this morning. But I suspect this latest consolidation will have a little more time to run, at least in some sort of sideways to downward fashion, although I think much of the downside risk has already been seen.

The S&P 500 has pulled back -5.5% so far, and I'm not sure we necessarily have to see a 10% pullback like many pundits are calling for. I saw a statistic over the weekend that in the last 3 post-recession recovery rallies, the Nasdaq rallied for an average of 16 months before it experienced a 10% pullback. So far, we are 7 months into this recovery rally. Just food for thought.

long GS


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