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.