Monday Morning Musings

The newsflow is relatively light this Monday morning, so the markets are taking their cues from overseas trading. Asian markets were nicely higher overnight, and Europe is strong this morning. Also, the euro is having a nice bounce again after a strong industrial production report in the eurozone.

The dollar is lower as the euro is higher, and that is boosting most commodities. Oil is higher near $76, but gold is lower, although still hovering around $1222. It's interesting how gold used to normally rise when the dollar was down, but lately they have been trading in tandem.

The S&P is currently above the key 1100 level, but I am keeping an eye on its overhead 200-day average which is currently at 1108.

Leading sector ETFs this morning are energy (+1.53%) and industrials (+1.34%), while financials are lagging (+0.21%). Homebuilders (+2.05%) and REITs (+1.76%) are also doing well.

Trading comment: The S&P failed the last 2 times it rallied to its 200-day, so its possible it could get through it this time. There has been a lot of bearish sentiment of late, so it wouldn't be surprising to see the market lift a little to get the recently minted bears to question their stance.

I am still keying in on the credit indicators, and unless I see a marked change there (credit default swaps, TED spread, LIBOR, etc) I am sticking with my defensive posture. That doesn't mean there won't be good trading opportunities, it has more to do with our global asset allocation and the fact that as the bull market slows, leadership has narrowed and a rising tide is no longer lifting all boats. So stick with the leaders and pare back on lagging stocks.

long GLD