Is This Rally Running Out of Steam?

The market is down in early trading, on relatively no news. The dollar is higher so far, which has been cited as one factor that could be weighing on the market, and commodities more specifically.

Oil is trading lower to $86.50, but gold is bucking the dollar's strength, and spiking to $1147. Gold has had a nice bounce lately, but it might surprise you to know that it has yet to surpass its January highs.

10-year yields are a tad lower to 3.95%, but traders will be closely watching today's 10-year Note auction at 1pm ET. And disappointment over demand for bonds could push the benchmark yield back above the 4.0% level. I am still holding a small short Treasury position as a hedge against our bond holdings.

Asian markets were higher overnight, except China which did not participate.

The VIX is up 1.5% to 16.48 after reaching a new multi-year low yesterday at 16.08.

Trading comment: This market just keeps chugging along, despite volume levels running light. New highs have always been decreasing on the rallies, which is another yellow flag. I have also recently highlighted complacent sentiment as a possible negative. To wit, the VIX hit its lowest level yesterday since May 2008. Now I know we were in a bear market at that time, but May 2008 was certainly not a good time to be adding to longs.

It feels like there is sufficient demand that a dip would likely be a buying opportunity, but I have seen these scenarios before, and it would not surprise me if some news or event out of left field surprised the market and gave us a little short-term whack.

As I said, I am still bullish, I just don't want to chase a complacent market. I have raised a little cash and will look to be patient and await a dip before buying. We are also very close to earnings season, which always presents opportunities.

long TBT