Economic Data Helps Stocks Rally Early

Global markets started the day lower, with Asian markets down overnight and European bourses lower this morning. Our markets also opened weak, but quickly bottomed and have since rallied back into positive territory on the heels of some positive economic reports.

Advance Q2 GDP came in at 2.4%, just slightly below estimates of 2.5%. But there were strong upward revisions to Q1 GDP, such that it is now estimated to have posted growth of 3.7%, which is pretty strong. Of course, the bigger questions is what growth is going to look like in Q3 and Q4 of the year, given that most analysts expect a second half slowdown.

Also, Chicago PMI came in at 62.3, above estimates for a reading of 56.3. And final Consumer Sentiment for July rose to 67.8 from its preliminary reading of 66.5.

Despite the positive economic reports, bond yields are falling, back down below the 3.0% level to 2.94%. The volatility index (VIX) is fractionally higher to 24.30.

Among the sector ETFs, materials are strongest (+0.40%) so far, followed by industrials (+0.30%); tech is lagging (-0.40%) along with utilities (-0.33%).

The dollar is bouncing today at the expense of the euro. Oil prices are lower to $77.50 and gold is up a bit to $1172.00.

Trading comment: The market looks set to finish the month of July with nice gains, to the tune or approximately +7%. But the indexes are still flat to down on the year, and the S&P is still trading below its key overhead 200-day moving average.

I have talked about wanting to see benign consolidation, or light pullbacks, in the market while it works off its overbought condition. So far this has been playing out. If it continues, I think the SPX could be in position to rally above that 200-day, which would likely bring in more buyers who are currently on the sidelines while this battle plays out.

Morning Roundup

The market is slightly higher in early trading. Jobless claims came in below expectations (457k vs. 464k consensus), and that helped boost sentiment at the open.

Asian markets were mixed overnight, but Europe is higher this morning after some positive eurozone economic reports and a dip in German unemployment. That is helping boost the euro to a 2-month high, while the dollar is lower.

Commodities are higher, with oil prices up to $78 but gold prices only fractionally higher at $1160.

On the earnings front, some tech names like Akamai (AKAM) and NVDA are lower after reporting earnings, while stocks such as Altisource Portfolio Solutions (ASPS) and Green Mountain Coffee (GMCR) are nicely higher. I thought Visa (V) reported a solid quarter, but its stock is lower this morning.

Energy is the leading sector (+0.78%) so far, followed by financials (+0.75%); consumer staples (-0.55%) and utilities (-0.16%) are lagging.

The 10-year yield is higher to 3.01%; and the volatility index (VIX) is lower to 23.89.

Trading comment: The market continues to hold up well. Yesterday's selloff was relatively contained, and so far today we are not seeing any follow-thru selling. I showed the other day that the S&P had run into overhead resistance at its 200-day average. Moreover, I said that a bullish outcome would be for the market to pull back and consolidate its recent gains, and then make another stab at breaking out above that 200-day average. As long as the market continues to mull around near these levels, that scenario is still in play.

long ASPS, GMCR, V

Quote of the Day

"What we think determines what happens to us, so if we want to change our lives, we need to stretch our minds."
— Dr. Wayne Dyer: Self-development author and speaker

Positive Earnings Reports Continue To Outnumber Negative Ones

The market is trading down slightly in early trading, following a weaker than expected economic report. Durable goods orders for June decreased -1.0%, vs. expectations for a 1.0% increase.

On the earnings front, a large batch of companies topped estimates once again, including Broadcom (BRCM), Boeing (BA), Comcast (CMCSA), Las Vegas Sands (LVS), Aflac (AFL), and more.

Asian markets were up sharply overnight. Japan spiked +2.7% and China rose +2.3%. But the enthusaism lost momentum by the time the opening bell rang in the U.S.

The 10-year yield is flat at 3.04%. On the chart, it looks like this Note put in a double-bottom at 2.90% and is close to breaking its recent downtrend. A move higher in yields would probably reflect better sentiment about the economy, so I won't be upset to see a little lift in yields.

The dollar is roughly flat so far, as are gold prices near $1158. Oil prices are lower near $76.85. The volatility index is +3% higher to the 24 level.

Trading comment: The chart below shows how overbought the market has become. This is a relatively short-term gauge, and simply means that the market could be poised for a pause in the short-term. I think that is a likely outcome, and have held off of new buys until we do pull back a little. The SPX 1115 resistance, right at the 200-day average, is still in effect also. And many leading stocks that have spiked higher look very extended, and also need to consolidate to present better entry points.

S&P 500 Tests Its 200-day Moving Average

The market is slightly higher in early trading, following a nice 3-day rally. I think its obvious that the reason the market is higher this morning is that the cast of Jersey Shore was at the NYSE to ring the opening bell. I also heard that it was the first time the NYSE sold out of guest passes. Too funny.

In all seriousness, there was another round of solid earnings reports last night and this morning, and a better than expected housing report. The CaseShiller Home Price Index for May rose to 146.4, with the 20-city composite up +4.6%. Despite the positive report, homebuilding stocks (XHB) are lagging this morning.

The financial index is leading the way so far today, after banks including UBS, Deutsche Bank (DB), and Regions Financial (RF) all reported strong earnings and saw their stocks gap higher. There was also some positive news in the form of the Basel Committee saying it may ease capital and liquidity requirements.

Utilities are the next strongest group this morning (+0.81%), while energy is lagging (-0.70%).

The dollar is up a bit this morning, while gold prices are lower ($1172), and oil prices are down to $78.50. Asian markets were mixed overnight; the 10-year yield is up to 3.03%; and the volatility index (VIX) is also higher to 23.20 following its multi-day slide.

Trading comment: The S&P 500 has rallied right up to its overhead 200-day moving average. This is a key, longer-term moving average, and will likely offer resistance on this test. I say that because the market is also overbought just as its reaching this zone. A positive resolution would be similar to what we saw a couple of weeks ago when the SPX tested its 50-day average, pulled back for a bit, and then rallied again and successfully closed above it.

I've highlighted the level of the 200-day in pink below. It stands right around the 1115 level. This level is also notable because it is right where the SPX closed on 12/31/09. So it brings the market back to even on the year, and could mark a level where some participants are just happy to be back to even, and looking to sell.

So a pullback would be good here, as it would give the market chance to catch its breath. I am focusing on those stocks that reported the strongest earnings and broke out to new highs. They are likely the best candidates to add to on pullbacks, as they should continue to lead the market if the major indexes remain strong.

Quote of the Day

It’s a scientific fact that if you stay in California you lose one point of your IQ every year.
-- Truman Capote

Monday Morning Musings

The market rallied to a strong finish on Friday, and so far today is adding to those gains. On Friday, the results of the European stress tests were released. I have some complaints, in that it doesn't appear that their test were is rigorous as ours were here last May. Only 7 out of 91 banks didn't pass the tests in Europe, and they were said to be in need of raising an additional $3.5 billion in capital. That is a very small figure. I believe our banks needed to raise something like $75 billion.

But hopefully it does removed an additional element of uncertainty from the market, and that is why the market did rally into the close. Of course, Europe's bourses are relatively flat to lower this morning, so the reaction there is muted so far.

One of the things that got the market going this morning was a strong earnings report from FedEx (FDX), which also increased its outlook above consensus. FDX is looked at as a good barometer for the overall economy, so when they give strong guidance, it usually helps boost investor confidence.

Additionally, the new home sales report was just released, and it came in above expectations (330k vs. 310k consensus). That report also helped boost the market, pushing the S&P 500 further into positive territory, and just a few points below the flat mark for the year (1115).

Asian markets were higher overnight; the 10-year yield is higher to 3.01%; and the VIX is also higher so far, to 23.80.

Trading comment: Both the S&P and Nasdaq are now both comfortably above their respective 50-day moving averages. Last week, I mentioned this as a possibility and listed it as something we needed to see to embolden the bulls. The key will be that on any pullback, that 50-day average should act as support. But if it holds, it could signal that the intermediate-trend of the market has changed.

Many leading stocks reported very solid earnings reports and saw their stocks gap to new highs. I continue to think that while these leading stocks can remain strong, the leadership has narrowed, and not all stocks and sectors will participate. So look for stocks that have demonstrated leadership, and don't spend all of your time and energy looking for down and out stocks that you think should catch up.

Scheduling Conflict

I am travelling today, and will not be able to write any posts. Keep the market up, and I'll be back in the saddle on Monday

Strong Corporate Earnings Continue To Top Expectations

Sorry for the lack of posts yesterday. Yes, it was just that busy. The market put in a surprisingly strong session yesterday, opening lower on the IBM earnings report, but then quickly bottoming and building steam throughout the day and into the close.

This morning, the market is slightly higher once again on several stronger than expected earnings reports. Apple (AAPL) was the big one, beating estimates by 40 cents. What is most surprising to me is that a company as large as Apple can still grow top-line revenues by +60% from last year. That is astounding. And while growth will have to slow due to the law of large numbers, I think that the company will continue to post solid growth and profitability for awhile.

There were also strong earnings reports from VMware (VMW), United Tech (UTX), Coke (KO), Morgan Stanely (MS), and Wells Fargo (WFC). The strong reports from those financials has the bank index nicely higher so far, even as the overall market is stalling.

The dollar is higher this morning after weak debt auctions in Portugal and Germany are weighing on the euro. Despite this, european stock markets are higher this morning. Asian markets were mixed overnight.

Oil is slightly higher near $78 and gold is also up a bit to $1194. The 10-year yield is up a tad to 2.93%, but still below the 3% level. The volatility index (VIX) is also higher today at 24.40, which shows expectations for only moderate volatility.

Also, Chairman Bernanke speaks today. While his comments are not expected to be different from the message he has put forth recently, there is always the potential for markets to react to something he says.

Trading comment: The S&P 500 rallied strong yesterday, and today is back testing its overhead 50-day moving average (near 1086). One of these times, the market is likely to be successful in breaking above that moving average and sticking. I think the bears are fearful of this fact, and if the SPX can get back above the 1100, it will likely spark another round of short-covering by the bears. As such, I remain constructive on the market's recent action.

long AAPL, VMW

Monday Morning Musings

The market is higher in early trading following Friday's sharp selloff. Friday's action was likely exacerbated by options expiration, in addition to some negative reactions from earnings season.

This week will have a lot more earnings reports, including IBM today, Goldman Sachs (GS) tomorrow morning, Apple (AAPL) after the close on Tuesday, and QCOM, EBAY, ISRG on Wed., and CMG and MSFT on Thurs (to name a few).

Asian markets were mixed overnight, with China bouncing +2.1%. European bourses are higher this morning, despite the news that Moody's downgraded Ireland's credit rating.

The dollar is a bit lower this morning, as are most commodities. Oil is lower to $75.75, and gold is trading down again to $1184. The price action in gold has been pretty negative all month, but probably not that surprising in light of how well gold traded in the first half of the year.

The 10-year yield is a bit higher to 2.95%; and the volatility index (VIX) is up +1.2% to 26.57.

Trading comment: The S&P 500 once again was unable to power through resistance at its 50-day moving average. This is an area I had been watching, and one from which the market turned lower on Friday. That doesn't mean the SPX can't break above that level on its next try. The market had become overbought, and probably was in need of some consolidation.

Investor sentiment is already pretty bearish. The number of bulls in the Investor's Intelligence poll last week hit their lowest level since April 2009. The put/call ratios have remained elevated recently, and the assets flowing into the bearish-tilted Rydex funds is also at high levels. That gives me some comfort that this pullback should be contained. If investor sentiment was already bullish on this pullback, I would be a little more worried.

long AAPL

Google Stumbles on Earnings

As promised, below is my take on the Google (GOOG) earnings report and conference call:

Google (GOOG) reported an okay quarter, although the miss on the EPS line is already knocking the stock down in after-hours trading. Revenue growth was solid and ahead of estimates, with growth of 24% from year-ago levels. EPS came in at $6.45, roughly $0.09 shy of estimates. That equates to 20% annual earnings growth.

The tax rate rose from 22% last quarter to 24% this time, which would account for some of the drag on earnings, but it looks like the rest came from an increase in operating expenses. Capital expenditures doubled from last quarter, and headcount rose 50%. I understand that Google management is focused on the long term and making investments as a result. I just feel it could manage its income statement a little better and avoid these types of earnings misses.

International revenues accounted for 52% of the total, slightly lower than last quarter. UK revenue growth was lower, at 8%, and the "rest of world" category grew revenues 26%. The standout was actually the U.S., which showed accelerating revenue growth, going to 26% from 22% last quarter. And forex hedging produced a $79 million benefit to results.

Google reports a bevy of metrics for investors to assess their business, so here they are. Traffic acquisition costs were in line with expectations at 26%. Paid-click growth remained healthy at 15%. Cost per click was mildly disappointing, falling to 4%. AdSense revenue growth also stayed healthy at 24%. Headcount grew by nearly 1,200 people. And free cash flow was $1.61 billion, leaving a whopping $30.1 billion on the balance sheet.

For the life of me, I don't know why Google needs such an enormous cash hoard. It should return some of that to shareholders. To make matters worse, the CFO said management has set up a $3 billion commercial-paper facility for operating capital purposes. Why do you need to issue commercial paper when you're generating $2 billion in cash flow per quarter? And management said there has been no decision on stock buybacks. I also think the company should implement a buyback that would help offset dilution and boost EPS.

Management did say more traditional advertisers are embracing search and that large advertisers are integrating their ad platforms to include search, display and mobile. It also highlighted many improvements to its search index and results and said 160,000 Android devices are being activated daily. So, the trends are moving in the right direction, it's just that innovation continues to move faster than monetization.

The stock is down roughly 4% after hours and will likely struggle tomorrow. Investors want to see earnings estimates moving higher, not flat or, worse, getting trimmed. This issue could keep GOOG in the penalty box for the near term. I am still a long-term investor, but this quarter didn't provide any catalyst to add to positions.

long GOOG

Sellers Ignore A Raft Of Better Than Expected Earnings Reports

The market is sharply lower in early trading, despite a raft of better than expected earnings reports this morning. The bellwethers that topped estimates include Bank of America (BAC), General Electric (GE), and Citigroup (C). The one company that was unable to top estimates was Google (GOOG). I covered the GOOG conf call yesterday, and will post my write-up later.

In economic news, the June CPI actually fell -0.1% (in-line with consensus), so those folks looking for inflation around the corner should still be more concerned with deflation, imo. The Univ. of Michigan consumer sentiment survey dropped to 66.5 from 76.0 the prior month, a large dropoff.

In other corporate news, Goldman Sachs (GS) settled charges with the SEC by paying a $550 million fine, but not necessarily admitting to any wrongdoing. The removal of this uncertainty is boosting GS stock by +3% today, but the victory on the part of the SEC makes me think they will likely try to go after other investment banks with similar lawsuits.

Also, BP has provided encouraging results from its well. For the time being, it appears the flow of oil into the Gulf has ceased. But they have pointed out that there is still more testing that needs to be done.

The dollar is up slightly this morning, as the euro slips from its recent highs. Oil prices are lower to $75.88, and gold is back down below the $1200 level, currently near $1189.

Asian markets were flat to lower overnight; the 10-year yield is moving lower again, currently at 2.95%; and the volatility index (VIX) is spiking higher today by nearly 11%, reaching as high as 28 earlier.

Trading comment: The market was lower yesterday, but rallied back by the close of trading. Some of this may have been exacerbated by today's option expiration. But today the market is lower, which isn't surprising given how overbought the market was after its 7-8 day rally.

As I said yesterday, I believe that bearish sentiment is already sufficiently high than any pullback should be contained. Earnings season has been mostly positive so far, a trend that would support the bullish thesis if it continues.

long BAC, GOOG, VXX

China GDP Shows Slight Slowdown

The markets are lower this morning, on the heels of a couple of weak economic reports on manufacturing. The Empire State Manuf. Index came in at 5.1, well below the 18.0 estimates, and also down from last month's reading of 19.6. The Philly Fed Index also contracted, falling to 5.1 in July (vs. 10.0 consensus) from the prior month's reading of 8.0.

So the market started out a bit weak, and the selling picked up when the Philly Fed was released. Of course, after a 7-day rally, any excuse to take profits is fairly normal.

On the earnings front, JPMorgan (JPM) reported better than expected results, led by a large decrease in loan loss reserves. But given this morning's selling, the news has done little to lift financial stocks.

In overseas news, China released its Q2 GDP estimate last night, and said their economy grew 10.3% during the period, which was a tad below estimates and below the Q1 rate of 11.9%. I think the slowdown was expected, and how growth holds up for the second half of the year is the bigger question right now.

Asian markets were lower overnight, led by China (-1.9%). European markets are lower this morning, despite the euro bouncing to 2-month highs vs. the dollar. In commodities, oil prices are lower to $75.75, and gold prices are slightly higher near $1211.

The 10-year yield is lower on the weak economic data, testing the 3.0% level currently; and the volatility index (VIX) is +8.25% higher so far to 26.95.

Trading comment: Today's pullback is not surprising in light of the 7-day rally we just had. At this point, I think any pullback should be modest given that investor sentiment has remained highly bearish during this rally. The ISEE call/put index has been below 100 all week, which indicates more bearish put buying than bullish call buying. The investment advisor surveys also continue to reflect elevated bearish levels.

So the proverbial 'wall of worry' is still there. Of course how the market reacts to the flood of earnings reports to come over the next few weeks remains a wildcard, so we're staying flexible and taking a wait and see approach.

long VXX

On The 7th Day, They Rested

Stocks have been up for six straight days now, and the S&P has rallied nearly 7% during that time span. That is quite a run, and we quickly find ourselves with the major equity indexes back at overhead resistance levels.

Last night Intel (INTC) reported great results, topping expectations and raising forward guidance. That news boosted its stock by roughly 5%, and has also helped boost the semi index by nearly +2% while the rest of the market is lower.

In economic news, advance retail sales were lower than expected at -0.5%, although that is not as severe a decline as last month's -1.1%.

The strong INTC results also boosted sentiment in Asia, and those markets rose nicely overnight, led by Japan's +2.7% spike. European bourses were slightly lower this morning.

The dollar is up slightly in choppy trade. Oil prices are a bit lower to $76.65, and gold prices are also slightly lower to $1207.

The 10-year yield is lower this morning to 3.08% after a big rise the last several days. And the VIX is up +1.38% trading just below the 25 level at 24.89 currently.

Trading comment: After the six day rally, some backing and filling (read: consolidation) would actually be healthy action here. If the market can pull back slightly and trade sideways for a little while, I think the odds of it then rallying above its 50-day average go up. What I don't want to see is for the market to plunge from these levels, which would embolden the bears who are likely feeling scared about their convictions right now.

Earnings season has gotten off to a strong start, but it is still very early. I fully expect some big names to report results that are lackluster and elicit disappointing results in those stocks. But big picture I am looking for earnings season to be mostly constructive. So don't get overly optimistic on the strong reports, but don't get overly pessimistic on any disappointments.

Bulls Try To Go For Six In A Row

The market is up sharply this morning, with the major indexes better by more than 1% in early trading. Last night, earnings season kicked off with Alcoa (AA) and Novellus (NVLS), both of which reported better than expected results and saw their stocks rally.

Tonight we have Intel (INTC) on tap, which should be an important datapoint for the tech sector and the semiconductor index.

Asian markets were lower overnight, led by China (-1.6%) after news of continued efforts there to slow property investment and steel production. But European bourses were nicely higher this morning after another successful debt auction by Greece.

This is boosting the euro, and weighing on the dollar. Commodities are also higher, with oil up to $76.75, and gold rising to $1217 right now.

The 10-year yield is higher again, climbing back to 3.08%; the volatility index (VIX) is another -2.9% lower to 23.70, which marks a big decline in expected volatility.

Trading comment: As I mentioned yesterday, the S&P 500 is nearing an important test at its overhead 50-day average. That key moving average currently sits at 1095, just a couple of points away from current levels. I think it is highly likely that the market pulls back initially, but the key will be if the market can re-rally after a brief pullback and penetrate those resistance levels.

I saw an interesting statistic this morning: According to Jason Goepfert at sentimenTrader.com, the last time S&P futures gapped up 1% after five straight up days was September 2006. There were two other times in history (March 2003 and September 1996) that this phenomenon occurred. Both dates marked the launch of bull markets. Interesting.

Monday Morning Musings

The market is higher in early trading, which is a little surprising following last week's 4-day rally and outsized gains. There was some M&A news this morning, in the form of Aon (AON) announcing it will buy Hewitt Associates (HEW) for $50, a 40% premium to Friday's close.

There is no economic news to report this morning, but earnings season kicks off after the close when Alcoa (AA) reports. Google (GOOG) is due up to report on Thursday, and I will cover the call here.

Asian markets were mixed overnight, with China higher and Japan lower. European bourses were higher this morning. The dollar is higher today, while the euro is lower. In commodities, oil prices are up a little to $76.35, while gold is down a bit to $1205.

The 10-year yield is steady around 3.05%, and the VIX is down -4% to 23.90, falling below the 25 level. This could be a bullish sign for equities.

Trading comment: The market has quickly worked off its oversold reading, and is now slightly into overbought territory. It is likely that we see some pullback this week, after last week's 4-day win streak. But after that I would not be surprised to see the market push higher again.

Of course, a lot will have to do with how earnings reports come in, and what management's tone and guidance look like. I am still in the trading range camp, but I could see the S&P 500 rally up to its overhead 50-day before running into stiffer resistance.

long GOOG, VXX

Google Gets Its China License Renewed

The market is higher again in early trading. If it were able to close in positive territory, it would mark the 4th consecutive daily advance this week, which is a welcome change from the price action of the last few weeks.

There are no major catalysts this morning in the form of market moving news such as earnings reports or economic data. One news item that is getting attention is that Google (GOOG) announced that the Chinese government renewed its Internet license. The news is boosting shares of GOOG +2.5% so far.

Asian markets were higher overnight, despite the announcement that the Bank of Korea hiked interest rates 25 basis points to 2.25% in a surprise move. Korea becomes the fourth Asian central bank to hike rates in the past month, illustrating that their economies are still experiencing stronger growth than most of the developed nations.

The dollar is a bit higher this morning, but so are oil and gold prices. Oil is slightly higher near $75.66, and gold is back above the $1200 level at $1211 currently.

Trading comment: We did a little bit of selling yesterday in a couple of ETFs and mutual funds that we own. After such a strong 3-4 day rally, the market likely will see some backing and filling in the days ahead. But I would not be surprised to see another push higher at some point that would push the major indexes closer to their downtrending 50-day averages. Those are levels that would present a better opportunity to get more defensive.

Of course, earnings season starts next week, and even if companies meet estimates, the reaction in stocks is going to depend on what management's say in their guidance and whether forward estimates prove overly optimistic. Have a good weekend.

long GOOG

Amid All The Talk of Slowing Growth, the IMF Raises GDP Projections

The market is higher in early trading, adding on to yesterday's outsized rally. Asian markets followed the lead of the U.S. and rallied strongly overnight, led by Japan (+2.8%). This morning, European markets are also higher, after the Bank of England and the ECB both left interest rates unchanged at 0.50% and 1.00%, respectively.

But the biggest news that I have seen are the headlines from the IMF that it has increased its world GDP projections for 2010 from 4.2% to 4.6%. Haven't they heard all the chatter about the coming slowdown? I guess not. For 2011, it held its forecast steady at 4.2%, although it did lower its forecast for the Euro area in particular.

I personally think that their forecasts will prove overly optimistic, as they likely have strong growth projections for China than I think will materialize. But it is nonetheless interesting that they are taking their estimates higher rather than lower.

In economic news, jobless claims came in a bit lower than expectations, but continuing claims fell all the way to 4.41 million, which is the lowest continuing claims count in 20 months. This positive labor data likely helped boost bullish sentiment at the open.

The euro is higher this morning, while the dollar is lower. Oil prices are higher to $75.50, but gold prices are down again, near $1190 currently.

The 10-year yield is bouncing back above the 3% level to 3.03%; and the VIX is down slightly to 26.80.

Trading comment: I didn't make many trades yesterday, other than adding to a Ford preferred we own. If the market closes up again today, I might look to lighten up on some of the ETFs we own. The market could continue higher as it works off its oversold condition, but we will soon be into earnings season, where further progress will depend on what managements have to say about their outlooks for profits.

long FprA, VXX

Market Remains Heavily Oversold

I don't know how many times I have said that I don't like a market that opens too strong, too early. Yesterday was just another glaring example. The Dow spiked 150 points higher just after the open, but by late day it have given back all of those gains. A late day rally did help it manage to finish in positive territory, but it's not the kind of action I would prefer.

This morning, the market is higher again in early trading, but let's hope we don't see a repeat performance. There is very little news this morning on both the corporate news as well as economic data fronts.

Asian markets were mixed overnight, with China higher and most others lower. Europe has been down this morning, although many markets are paring their losses.

The dollar is roughly flat; Oil prices are higher to $72.65, but gold prices continue to languish, down slightly near $1192.00.

The 10-year yield is up slightly to 2.96%; and the volatility index (VIX) is -5.5% lower to 28.0. It is now below both the key 30 level as well as its overhead 50-day moving average. I would like to see the VIX continue to drift down below 25, which would support a further bounce in stocks.

Trading comment: I have heard that by some technical measures, this market is as oversold as it has been since the March 2009 lows. Yesterday I showed a chart of the oscillator that also looked pretty oversold. So it is reasonable to expect the market to bounce here, the question will be where it runs into resistance. But let's allow it to at least bounce before we go there.

In my trading range scenario, we may have seen the low end of said trading range for the near-term. I still have some positions I would like to trim, but I will wait for higher levels before I do any more selling. My portfolios are still fairly defensive right now.

Monday Morning Musings

The markets are nicely higher this morning, as were overseas markets, trying to reverse the persistent slide over the last 2 weeks. In fact, the market has moved lower in 9 of the last 10 sessions. There isn't much in the way of market moving news this morning, so it looks like traders are simply taking advantage of the pullback to buy beaten down names.

The chart below shows the oscillator for the Nasdaq, and you can see that the market is again at extreme oversold levels. The last time the market got down into this area in June, we saw a pretty good snapback rally.

Asian markets were higher overnight, led by a 1.9% bounce in China, and Europe is sharply higher this morning. Oil prices are also higher, up to $73.00. But the recent flight into gold continues to reverse, with the yellow metal down near the $1200 level currently.

The volatility index (VIX) is -7.0% lower this morning to 28.0. I have been watching the 30 level as a sign of whether volatility is expected to rise sharply, so a move below this level could be a good omen for the bulls.

The 10-year yield is up a tad, but still only at 2.99%. This low level of yields is still reflective of the bond market's concerns that economic growth is slowing.

Trading comment: As I showed above, the market is very oversold right now. Also, sentiment remains for the most part pretty negative. So a combination of short-covering and some bargain hunting should help the market bounce in the short-term.

Earnings season won't start for a couple of weeks, and that will likely be the next meaningful catalyst for stocks. Expectations have come down considerably for corporate earnings, so if companies can beat the estimates and have any positive comments about their outlook, that should help boost stocks also.

That said, I am still in the trading range camp. It is possible that we have seen the low end of that trading range for the near-term, but I don't yet see the conditions for a sustainable advance that takes the market back to its April highs.

Scheduling Conflict

I will not be blogging on Friday. I have family obligations to attend to. Just be glad you don't have to go to Disneyland ahead of the July 4th weekend. Wish me luck--