Consumer Confidence Drops To 2-year Low

The market is lower in early trading, on the heels of some profit taking and a disappointing consumer confidence number. The S&P 500 has rallied more than 7% in the last five sessions, so traders who were buying last week's lows actually have some profits to take.

The market was down only slightly at the open, but the Consumer Confidence number came out much weaker than expected. Consumer Confidence Index for August fell to a 2-year low of 44.5, down sharply from July's level of 59.2. I tend to view consumer confidence as more of a coincident indicator as opposed to a leading indicator.

The other big news event today will be the release of the recent FOMC meeting minutes. Investors will be looking for hints about additional policy adjustments and what tools the Fed might use if it decides to become more accomodative with monetary policy.

Asian markets were higher overnight, except China which has lagged in recent days. Oil prices are higher near the $88 level; and gold is also higher around $1831.

The 10-year yield is lower today, falling back to 2.18%; and the VIX index fell below its 20-day average yesterday, and is hovering just below the 33 level currently.

Trading comment: The chart below shows the recent bottom for the SPX at the 1120 level. This level was tested several times, but ultimately held. The plunge in stocks was met with some extreme spikes in bearish sentiment. That, along with sharply oversold readings helped the market put in a short-term bottom. But that is different from a longer-term bottom.

Markets rarely make "V" bottoms, where they spike back up to their former highs after just one plunge lower. Far more often, markets have a retest of those lows at some point. If those lows hold the next time around, that can lead to a more sustainable bottom. And if they don't hold you can see the market trade to lower levels. That is why it is too early to call a bottom here. But it doesn't mean that the S&P can't keep rising until it hits more resistance. I could see the SPX working its way back up to 1250, and even that wouldn't necessarily change my intermediate-term outlook.