Euro Higher Again, But S&P Stuck Below 200-day Average

The market is nicely higher again this morning, but as we have seen lately when the market is up strong in early trading, it often fades by the closing bell. That is why I always say I prefer a market that opens weak and builds strength into the close.

Yesterday I commented that the S&P was approaching its overhead 200-day moving average, which would likely act as resistance. Right on cue, the market rallied to that level and then stalled (see chart below). When the news came out that Greece had its debt rating downgraded, the market began to selloff and by the close had given back all of its gains.

The market is higher again this morning on another bounce in the euro, following news that Spain and Ireland both had successful debt offerings. This is overshadowing corporate news here from Best Buy (BBY), which missed earnings and its stock is lower.

The lower dollar is helping most commodities. Oil is higher, near the $76 level. Gold continues to struggle, but hasn't given back all that much from its recent highs, trading near $1223 again today.

Asian markets were slightly higher overnight; the 10-yr yield is lower to 3.25%; and the VIX is -6% lower, now well below the 30 level to 26.85. The VIX is approaching its 50-day average, so it will be interesting to see if it bounces from this level.

Trading comment: If this market is going to build on its recent rally attempts, it really needs to hang on to today's gains into the close. A lot of this feels like short covering. We know that every trader has been short the euro, so short covering there should not be surprising. I also think its likely that with all the bad news, many traders have also been short the market. So if we get above that 200-day moving average on the S&P, that could spark another round of short covering.

It's nice to see tech names leading again. This is a sector where we remain overweight, but I still don't see enough improvement in the credit gauges (TED spread, CDS yields, etc) to get overly bullish here for more than a trade. Stay nimble.

long GLD