Investors Continue To Pare Back Risk

After a late day selloff yesterday, the market has opened sharply lower today. The S&P 500 briefly broke below February's lows, a negative technical signal, but it has since rebounded and the major indexes seem to have stabilized for the time being down -2%.

The concerns continue to emanate mostly from Europe, where debt problems and banking concerns are rehashing scary memories from 2008. I would note that here in the U.S., the problems are much different than in 2008, as we have done a better job shoring up our banking system.

Tensions are also rising in Asia after news that the ship that was sunk in S. Korea may have come at the hands of N. Korea, which continues to make aggressive comments. This helped push Asian markets lower overnight, with Hong Kong and Japan both down more than 3%.

The news from abroad is trumping any positive economic data here in the U.S., including an in-line CaseShiller Home Price report (143.4 vs. 144.1 consensus), and the best Consumer Confidence reading we have seen since March 2008. May consumer confidence rose to 63.3, up substantially from 57.7 last month.

The flow into safe haven investments is prevalent today, with Treasuries rallying, the dollar higher, and gold up again. The 10-year yield is down to 3.13%; gold is higher to $1196; and the VIX is spiking +7.5% to an extremely high level of 41.20. I mentioned yesterday how difficult it is when the VIX is this high, and this morning's market open is a perfect example.

Trading comment: I don't view it as a good sign that the market can't even bounce from these grossly oversold levels. The S&P breaking below February's lows is another negative technical sign. I still think there is a lift at some point, which will provide a better opportunity to get more defensive. I don't like to sell on these big down days when everyone is panicking.

long GLD