Light Trading Ahead of FOMC Minutes Today

The market is trading down only slightly this morning, following yesterday's nice gains. There has been no economic reports today, but investors will be watching for any changes in the Fed's language when the FOMC minutes are released this afternoon. In particular, pay attention to the wording regarding low levels of interest rates for an extended period of time.

There was an explosion in a Massey (MEE) coal mine, killing some 25 people. Dangerous business. The stock is down -10% so far on the news.

The euro is lower after reports that Greece may want to renegotiate terms of its financial support. This is pushing the dollar higher in turn, and weighing on some commodities. But oil and gold seem to be bucking the dollar strength. Oil is higher near $86.75, while gold is also up again to $1137.

Asian markets were mixed to higher overnight. Australia's central bank raised interest rates again, this time by 25 bps to a 14-month high of 4.25%. Emerging markets continue to tighten monetary policy, from China to India to Australia. I think this is healthy, and hopefully will delay inflationary pressures.

The 10-year yield is lower to 3.95%, after briefly topping the 4.0% level yesterday; the VIX is -1.2% lower to 16.82.

Trading comment: The market rallied yesterday, but it came on very low volume. This signals there may have not been a lot of conviction behind the trading. That said, I wouldn't want to be sitting on the sidelines missing out on gains just because I thought volume was too low.

I bring this up because complacency seems to be on the rise a bit lately. This morning, the CBOE put/call opened at a fairly low level of 0.70, while the ISEE is even more elevated at 214. These are both fairly bullish readings for options players, and from a contrarian perspective, we don't want to see bullish get too high, as that leaves the market vulnerable to a pullback.

Yesterday I took partial profits on one of our positions (WFR) that has had a nice run. I wouldn't be opposed to doing that with other stocks ahead of earnings. Most stocks have had nice runs here, and could pullback following earnings announcements unless they really trounce the estimates.

long WFR