Congress Extends Bush Tax Cuts

The markets are mixed this morning, with the S&P 500 slightly lower despite Congress extending the Bush tax cuts last night. The Nasdaq is up a bit, after both Oracle (ORCL) and Research In Motion (RIMM) reported strong earnings and saw their stocks rally.

The fact that the market isn't up a bit more likely speaks to the fact that we are in overbought territory right now, and sentiment has become a little complacent. The markets are basically flat for the week, which is pretty good as the markets have refused to give back any of their recent gains.

The euro is lower this morning after Moody's cut Ireland's credit rating five notches. Seems like those guys are a little late if they had to jump down five notches. The EU also approved a permanent bailout mechanism for debt-ridden countries that will go into effect in 2013. That seems awfully far off into the future given the speed with which the markets move these days.

The lower euro is boosting the dollar, but commodities are mixed. Oil is higher to $88.35, and gold is also up a tad to $1371.

The 10-year yield is lower to 3.40%, after a big multi-day rally; and the volatility index is falling further to new multi-month lows to 16.42 this morning. The VIX isn't the best leading indicator, but it sure isn't signaling any pickup in volatility in the immediate future.

Trading comment: Although the market has been very stubborn in terms of giving back its gains, the fact that we are overbought and sentiment is still complacent make me not want to chase this market. The leaders that sold off hard earlier this week haven't broken their 50-day averages, and some have come roaring back (APKT, CTSH, etc). I doubt I will make any moves on this options-expiration Friday.

long CTSH, RIMM