Energy Stocks Snap Back From Yesterday's Pasting

The market is nicely higher in early trading, but yesterday I titled my morning post "Will the early bounce for stocks hold?", and the answer was No. That's why I like to see markets that are weak early but then close strong. These daily instances of the market opening strong and then closing on its lows are signs of distribution, and not a positive indication of demand.

The energy sector was the biggest loser yesterday, on the heels of concerns about BP's ability to meet its mounting financial obligations. Today, the sector is bouncing back, by far the biggest gainer among the various sectors.

The euro is firm again today, after the Bank of England held rates at 0.5% and the ECB also held steady at 1.0%. The dollar is conversely weaker today, which is boosting oil again, but not gold. Oil is up near $75.85, but gold continues to struggle after hitting new highs the other day. It is currently down 0.8% near $1220.

Asian markets were mostly higher overnight, and European markets are higher this morning. Spain is a notable performer, after its 3-year bond auction showed strong demand. Spain has a ton of debt coming due over the next month, so it is important for its bond auctions to be met with firm demand. We don't want another Greece scare.

The 10-year yield is higher to 3.26%; and the VIX is down almost -10% near that key 30 level again. The 30 level has acted as firm support the last couple of weeks, so a breakdown below this level would be notable.

Trading comment: No change to my recent mantra. I continue to use bounces to lighten up and construct a more defensive posture in our portfolios. The S&P 500 still trades below its 200-day moving average, and its 50-day average is coming down fast. If the 50-day crosses below the 200-day, it will signal what technicians call a "bearish cross", and could signal a longer correction.

long GLD