Mideast Tensions Remain At The Forefront

The market is lower in early trading, despite the futures being higher this morning before the market opened. Chairman Bernanke is testifying before Congress right now, but there is little new information in his remarks.

Of more interest is the continued geopolitical tensions in the Middle East, particularly Saudi Arabia today. Reports are that Saudi has sent tanks into neighboring Bahrain. Of all the countries where news can cause a spike in oil, Saudi Arabia is probably the most sensitive. Currently, oil prices are $1.35 higher to $98.40. Gold prices are higher today also, near $1422.

In economic news, the ISM Manufacturing Index came in at 61.4 for February. Not only is that better than expected, it marks the highest reading since 2004. So for the folks who see few positives on the horizon, the manufacturing sector has come roaring back during this recovery.

The dollar is firm today, and commodities are mixed; the 10-year yield is higher to 3.45%; and the VIX is 2% higher to 18.75.

Trading comment: It is normal for the markets to bounce after becoming oversold and nearing support levels. But this latest pullback is only a little over one week old, and I think it has more work to do in terms of both time and price. That is, most corrections during bull markets take approx. 3-6 weeks to fully run their course. And so far, the SPX has only pulled back -3.7% from peak to trough. Given the spike in oil and the real concerns in the Mideast, I would think a normal correction in the 5-10% range might be expected. So I want to continue to manage my risk, adhere to stop-losses, and look for opportunities to add to stocks that just reported strong earnings but are pulling back with the overall market.