Can Bulls Keep Their Foot On The Gas?

The market is rallying in early trading as the bulls try to keep this correction short in nature. Market leader AAPL has plunged over the last few days but today it is reversing higher and is currently up 3% on the session trying to recapture the $600 level.

In earnings news, there were some positive reports from bellwethers such as Coke (KO), Goldman Sachs (GS), and JNJ. All of those companies beat earnings estimates and their stocks are higher so far.

Asian markets were mostly lower overnight, led by China (-1.0%) after it announced that foreign direct investment fell 2.8% yr/yr. India was higher last night after the Reserve Bank of India cut its overnight rate in a surprise 50 bps cut to 8.00%.

Europe's markets are all higher this morning after strong demand for Spain's recent bond offering. This is no doubt helping sentiment in the U.S, where concerns over Spain have been rising. But Spain's auction of 3.2 billion euros of 12- and 18-month bills are within the maturities of the ECB's LTRO, so I don't think it's a true gauge of demand. I want to see if there is the same demand among investors when they auction new 10-year notes.

The dollar is a little lower vs. the euro, and commodities are mixed. Oil prices are higher near $104.70 while gold prices are slightly weaker to $1646.

The 10-year is getting a small boost back to the 2.00% level. And the VIX is plunging on this early rally, down -9% to 17.75 which is still above its 50-day average.

Trading comment: The S&P 500 closed back below its 50-day last night, and looked like that would lead to a deeper correction. But this market likes to keep investors on their toes and leaning the wrong way, so this morning it has shot back above that 50-day average. This is a battleground right now, and if the SPX can log a couple of closes above it (1377) I would have to give the benefit of the doubt to the bulls. We added to our shorts and hedges in recent days, and those positions will have to be reconsidered if this strength continues. But something tells me it might not be that easy.