Italy's PM Hangs On By A Thread

Funny action in Italy this morning. The European markets were higher this morning on the rumors that Italy's PM might lose his post. When the news came out that he won the vote, the markets sold off. Not much of a vote of confidence for Berlusconi, who lost the majority vote within his party. Italian yields continue to hover near the 6.7% range which is uncomfortable territory for the market.

Our markets are still higher, but not as much as they were in early trading. A handful of earnings reports have continued to roll in, but they are mostly secondary names. One standout was Priceline (PCLN), which topped estimates and gave conservative guidance. The Street is acting like management is lowballing the guidance and has bid the stock up +5% today above $535.

Financials are leading the early action, while consumer discretionary stocks are lagging. Weekly retail sales were positive at +3.1% but that is lower than recent figures.

The dollar is slightly lower, which is helping most commodities. Oil prices are higher near $96, while gold prices are flat right now around $1791.

The 10-year yield is struggling to stay above its 50-day average, and is currently trading at 2.01%. As for the VIX, the battle at 30 continues. The VIX had broken below that level earlier, but has since reversed higher at is just below that key level. I'm keeping an eye on the VIX.

Trading comment: The chart below shows how the S&P 500 rallied right up to its overhead 200-day average this morning. But this is key resistance and it might take a little longer to build up the momentum to break through it convincingly. I expect the SPX to consolidate its recent gains a little more before eventually breaking above this key moving average. I also would expect a close above those levels to attract some additional buying interest and short covering among technicians (which most hedgies are). In the meantime, more growth stocks are acting better. Names we have added to recently include: TSCO, SCSS, and ULTA.

long PCLN, TSCO, SCSS, ULTA