Wednesday, December 22, 2010

Will Consumers Start To Fret Over Prices At The Pump?

The market is slightly higher again in early trading. If you have been trying to fade this market lately, you are likely in a world of frustration.

In economic news, existing home sales rose 5.6% in November, above expectations. The homebuilder ETF (XHB) is higher, and the REIT etf (IYR) is higher as well. Also, final Q3 GDP figures came in at 2.6%, which is slightly higher than earlier estimates of 2.5%.

In corporate news, Nike (NKE) and Walgreens (WAG) both reported solid earnings, but the reactions in the stocks are mixed. WAG is nicely higher, while NKE is selling off. I was also surprised to see TIBX selling off in reaction to better than expected earnings.

The dollar is flat so far, and commodities are mixed. Gold prices are off a bit to $1367, while oil prices continue to climb higher to $90.62. I wonder if investors/consumers will start to worry if oil rises to $100. The more important factor is obviously prices at the pump. I heard my parents talking last night about how gas prices in their town just topped $3, so I know it is on people's minds. Something to keep on the radar.

Asian markets were mixed overnight; the 10-year yield is flat near 3.32%; and the volatility index is another 3.7% lower to 15.88.

Trading comment: The persistent bid under the market remains, as stocks have not sold off one bit lately, and the desire to put money to work into year-end is evident. I have taken some partial profits, but for the most part remain invested into year-end. I do think that we have a correction looming on the horizon, so I want to be prepared. The sentiment indicators I follow are back to levels which have almost always preceded a correction in the past.

long TIBX, VIX calls


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