Will The Early Bounce for Stocks Hold?

The market is higher in early trading on a bounce in the euro, for the most part. The euro is finally seeing a bounce, rising to the $1.20 level. This is boosting European markets, will all of them higher this morning.

There was also a strong economic report out of China that exports surged +50% year-over-year, easing fears of an imminent slowdown over there.

The boost in the euro is pushing the dollar lower, which is boosting most commodities. Oil is up sharply to $74.25, but gold is pulling back from hitting new highs yesterday, currently near $1230.

Chip stocks are doing well (+1.40%) after Texas Instruments (TXN) raised Q2 guidance slightly and said that they are not seeing any weakness from Europe at the moment. Among the sector ETFs, materials are leading (+1.54%), followed by industrials (+1.36%). Healthcare is lagging (-0.14%) followed by utilities (+0.10%). Real estate is also bouncing +2.18%.

The 10-year yield is higher to 3.22%; and the VIX is falling -5.8% to 31.73, but I would still like to see the volatility index get below 30 to indicate that some sort of normality is coming back to the market.

Trading comment: The big drop in the VIX is a welcome sign, if it holds. The market should enjoy a little bounce, but it has had difficulty breaking above any sort of resistance levels. At the margin, one positive anecdote is just how bearish all of these market commentators on CNBC have become. We will have to see if that bearishness makes its way into the investor sentiment polls.

Yesterday, the S&P 500 briefly broke below the February lows (1044) before bouncing. While said bounce is a normal reaction, I still think the market gave us a bearish signal with its action. Unlike past market corrections over the last 15 months that were all good buying opportunities, I am not as bullish on this one. I am still looking to use bounces to pare back equity exposure and adopt a more defensive posture while this plays out.

long GLD