Retail Sales Come In Better Than Expected

The market is rallying for a fourth straight day after several positive news items have hit the tape.

First, there were more solid earnings reports from Alcoa and Pepsi, both coming in above estimates.

Second, this morning's jobless claims numbers were also better than expected, including continuing claims.

Third, the September same-store sales figures for retailers were very positive relative to consensus estimates, and there is plenty of anecdotal evidence that consumer spending is not as bad as many believed. Even luxury auto sales are beginning to pick up, which are considered a good leading indicator.

European markets were higher after both the ECB and the Bank of England held rates unchanged. While many market pundits keep talking about inflation, the bond markets continue to be equally concerned about deflation, so I'm glad the central banks are not jumping the gun to raise rates. Central banks have an easier time dealing with inflation than they do combating deflation, just look at Japan.

Asian markets were also higher overnight; the 10-year yield is lower again, falling to 3.17%; and the VIX is down -2.7% to 24.01, breaking below its 50-day average. The dollar is also lower, boosting gold prices to new highs, while oil is flattish near $70.

Trading comment: So much for the big, nasty October correction many were calling for. Instead, it looks like the "stair-step" market continues, as the major indexes are back above their short-term moving averages, and not far from their highs of the year. The market is not yet overbought, so it still has some support in the near-term.

I added to our Bank of America (BAC) positions yesterday, but will likely wait to invest more until we get another small pullback. The key this year has been to buy on the 1-2 day pullbacks, and not wait for the 10% corrections that never seem to materialize.

long BAC, VXX