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