Thursday, July 14, 2011

Earnings Trump Macro Data In Early Trading

The markets opened on a higher note, despite the headline news that Moody's has placed the U.S. AAA-rating on review for possible downgrade if the debt ceiling isn't raised. The market seems to be acting like they think the debt ceiling will get raised before the clock ticks down to zero.

JPMorgan (JPM) reported better than expected earnings, and that has helped sentiment. Its stocks is up 3% in early trading, although most other financials are not up as much. Google (GOOG) reports earnings after the close tonight.

Italy announced that it has passed a new budget plan with austerity measures, which probably helps in the big picture, but European markets are still lower on the lingering debt concerns. Yesterday I saw noted bond fund manager Bill Egan speak, and he said he wishes Greece would just default already and get it over with. Then markets could price it in and move on.

Asian markets were mixed overnight. Commodities are mostly lower today, thought not by much. Oil prices have dipped below $97, but gold is slightly higher near $1588 and silver is higher as well.

The 10-year yield is higher at 2.91%; and the VIX is 2% higher to 20.39 after reversing higher the last two days.

Trading comment: Yesterday's rally faded by the end of the day. And this morning's early rally is fading as I finish this post. This, on top of some higher volume selloffs in recent days has put the recent rally under pressure, and could mean the market has some more work to do on the downside. In addition to the summer months always being choppy, the persistent headline risk is adding to the volatility in the market. Actively managing positions in this environment can add value, by trading around your core positions. When the market swoons, I like to add to my favorite stocks and then look to lighten up after rallies. And I am measuring these trading windows in weeks, not days.

KAM has long positions in GOOG, JPM


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