Wednesday, January 12, 2011

Europe Bounces On Strong Portugese Bond Auction

The market is rallying to fresh highs this morning on the heels of some positive news and action in overseas markets. Asian markets were higher across the board overnight (except Japan), and Europe is nicely higher this morning.

Both Germany and Portugal held successful debt auctions earlier, which greatly improved sentiment across the pond. Germany also announced that its GDP for 2010 grew by 3.6%, a solid rate of growth.

The sigh of relief with regards to European sovereign debt is boosting the euro, at the expense of the dollar. While this is weighing on gold again, down near $1379, it is not thwarting oil prices which are now up to $91.85.

In corporate news, yoga clothing maker Lululemon (LULU) raised guidance last night. This fast growing company has seen its stock on a tear, and this news pushed it another +8% higher today. Short interest in the stock is very high, so I'm sure there is a considerable amount of pain and short-covering going on in the market. But you can't deny that the consumer is willing to spend on things that they really want.

Among the sector ETFs, financials are strongest out of the gate so far, up 1.50%. Goldman Sachs (GS) made positive comments about the banking sector this morning, and yesterday's interview with JPMorgan's Jamie Dimon was bullish in that he said lending was up across the board in 2010 and the bank would like to reinstate its dividend if allowed to do so.

The 10-year yield is higher to 3.40%; and the volatility index is -3.3% lower to 16.32 on today's rally in the overall market.

Trading comment: Those looking for a correction (yours truly included) have been frustrated by the market hovering near recent highs and refusing to give back any ground. I think the correction camp simply became too crowded, and thus less likely to occur as most envisioned. I am still mindful that January can often be a month of headfakes, so I am looking for individual situations to add to, while keeping some powder dry just in case.

long JPM, VIX calls


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