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.