China Relents On Currency Moves

The markets are nicely higher in early trading on the heels of an announcement out of China that it is prepared to allow its currency to move more freely. Pundits have been critical of China that their rigid peg to the US dollar was unfair to global trade. Its decision yesterday will benefit companies that export to China. It also signals confidence in China's recovery prospects, as it will raise the cost of China's own exports.

The news led Asian markets to rally overnight, with China climbing +2.9%. European markets were also higher this morning on the news.

Commodities are leading the action so far, with the materials etf up +2.30%. Oil is trading higher to $78.65, while gold is just off its highs near $1256.

The 10-year yield is higher to 3.28%; and the VIX is lower again, trading down to 23.74.

Trading comment: The recent action in the stock market has been nice, including today's rally. Plenty of leading stocks continue to act well and push to new highs. But the ECRI Index last Friday continued to point to a slowdown, and the persistent drop in the Baltic Dry Index could be signaling similar concerns.

So while I continue to play the growth names in the stock market, I also want to be mindful of what I think could be a fairly pronounced second half slowdown. As such, I don't think the recent rally signals a new, sustainable uptrend. Rather, I view it as a nice relief rally after things had become overdone on the downside. But I want to stick by my mantra to take profits on marginal positions and trim back my equity exposure as the market climbs higher. I think this will position our portfolios better for the second half if I am right about the coming economic slowdown.

long GLD