Monday, June 28, 2010

Monday Morning Musings

The stock market is a bit lower in early trading, but not on much newsflow. The G-20 leaders met over the weekend, and for the most part agreed to work on slashing deficits. No major headlines were released that really moved markets.

Asian markets were mixed overnight, while Europe is higher this morning. This despite the euro trading lower, and the dollar up as a result. Oil prices are down this morning near $78.25, and gold is just off its recent highs near $1254.

Apple (AAPL) is bucking the broad market weakness so far, after news that it had sold 1.7 million new iPhone 4's in its first 3 days. I stopped in the Apple store, and put my name on the waitlist for the new phone, which is expected to take about 3 weeks to arrive. Seems like a long time to make the customer wait.

In economic news, personal income was a bit lower than estimates today (0.5%), but personal spending was a touch higher (+0.2%), despite the savings rate also ticking higher for the month to 4.0%. It appears consumers continue to balance spending with shoring up their personal balance sheets.

The 10-year yield continues to drift lower, now down to 3.05%. This is a very low level, and likely a reflection of the economic slowdown that seems to be coming. Friday's ECRI Index supports this thesis also, coming in with a negative growth rate for the third straight week.

And the VIX is up +4.5% right now to 29.82, rising towards that 30 level again after pulling back right to its 50-day average on Friday.

Trading comment: We are very close to quarter-end, where we could see some window dressing by fund managers. I continue to think that near-term strength should be used to lighten up on marginal positions and develop a more defensive posture. The 50-day average is quickly converging on the lower 200-day average, and if and when the former crosses the latter, it will confirm another bearish indicator. There have been times when the 50/200 cross was only temporary, but more often then not it is a warning to stay cautious. I will continue to monitor this one, and post charts accordingly. Also, the sentiment indicators I follow are not flashing high enough bearish sentiment to signal a bottom in here.

long AAPL, GLD


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