Monday, October 17, 2011

Monday Morning Musings

The markets are lower in early trading following last week's outsized 6% rally. That was the best weekly showing in more than two years. So it's normal to see a pullback following such strong price action. What the bulls hope for is just some quiet consolidation, without too much distribution.

Earnings season continues to heat up. This morning Citi (C) and Wells Fargo (WFC) both reported earnings, with the former beating estimates but the latter coming up a little shy. WFC is down 5% on its miss, and weighing on the financial sector. Halliburton (HAL) also beat estimates, but it looks like some serious profit taking there after a nice run into its earnings report. Apple (AAPL) reports this week, and is breaking out to new all-time highs ahead of its report.

Asian markets were higher overnight, and Europe was higher this morning after a G20 meeting this weekend. Leaders were pressed to come up with some sort of resolution within a week. I'm glad to see they're getting serious, but I am a little wary that expectations may be getting ahead of themselves.

The dollar is higher this morning, while commodities are mixed. Oil prices have eased back slightly to $86.40, while gold prices are firm near $1686.

The 10-year is lower today at 2.18%; and the VIX has really spiked higher already this morning, up nearly 13% back to the 31.85 level. This is an interesting development after last week's drop in the VIX below the 30 level. I think it shows traders are still jittery.

Trading comment: This is a tough juncture to consider new long positions right here. First you have the big rally from last week that will likely see some consolidation at the least, as well as profit taking. You also have earnings reports to deal with. And the action in WFC and HAL show the action following earnings reports can be unpredictable. That said, I expect AAPL to have a positive reaction to what I think will be very strong earnings again.



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