Monday, February 22, 2010

Monday Morning Musings

The market is slightly weaker in early trading, after Obama made comments about further health care reform proposals. There are also new regulations about credit cards, which I have previously posted on the site.

The dollar is firm today, which is weighing on commodity prices. Oil is trading near $79.90, while gold is weaker at $1115. In the energy complex, Schlumberger (SLB) announced a stock-for-stock merger with Smith International (SII), valuing the latter at a 22% premium. SLB is down -5.6% on the news.

Among the sector ETFs, financials (+0.73%) are leading, while energy (-1.52%) is the big laggard. Also, real estate (+0.30%) is firm, while gold miners (-1.45%) are weak.

Asian markets rose overnight, after China's bank regulator called on banks to prudently manage their lending.

The 10-year yield is up slightly to 3.79%; and the VIX is up +2% to 20.50.

Trading comment: After a very solid last week, the market is now firmly overbought. The chart below shows the oscillator for the Nasdaq at its highest level since last fall. This usually makes it a risky time for making new buys. I raised a little cash last week, and will look for a pullback before putting new money to work. Overall, I still think investor sentiment is sufficiently bearish that any pullback will be contained, and not break below the early Feb. lows.


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