Tuesday, February 02, 2010

Homebuilders Rally After Strong Earnings Report

The market is getting a nice lift in early trading, after opening relatively flat. Homebuilders are the leading sector so far after strong earnings reported by DR Horton (DHI) and an in-line pending home sales (+1.0%) report.

There were several other solid earnings reports this morning, and some of the stocks are getting nice bounces out of it: Emerson (EMR), Ann Taylor (ANN), and Whirlpool (WHR). Overall, corporate profits have been solid this quarter, but they have not been the catalyst for stock prices that many had hoped.

The dollar is lower today, which is boosting commodity prices. Oil is higher to $75.75 and gold has rallied back to the $1115 level. Nonetheless, the materials sector (XLB) is lagging. Industrials (XLI) are the leading sector this morning (+0.95%), followed by tech (+0.94%).

Asian markets rose overnight, led by Australia (+1.8%) after its central bank surprised markets and held their benchmark interest rate steady at 3.75%. China continued to struggle after ICBC reported new loans in January were lower vs. year-ago levels.

The 10-year yield is lower to 3.64%, and the VIX is another -3.4% lower to 21.83.

Later today, Paul Volker will testify on proposed banking regulations. He will say that proprietary trading and speculative activities at commercial banks should not be protected by the government and that restrictions should be placed on those activities. This information is well know, but I would not be surprised to see the market weaken when his testimony is televised.

Trading comment: The market is getting that oversold lift we talked about, and approaching the SPX 1100 level. This is more just a psychological level, while 1110-1120 will act as more significant resistance, if and when.

I have made a few small trades, but nothing big. I would look to raise a little cash on a further lift in the market to be in better shape for another pullback.

long EWA, GLD


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