Monday, April 09, 2012

Monday Morning Musings

The market is selling off on a delayed reaction to Friday's nonfarm payrolls report. Our markets were closed on Friday so this is the first chance traders have had to react to the news. Nonfarm payrolls grew by 120,000 in March, which was well below expectations for 200k jobs added. The unemployment rate was steady at 8.2%.

Overnight selling in Asia was also affected by concerns about slowing US economic growth. Japan and China were both lower, with China's CPI coming in above expectations at 3.6%. European markets are closed for the Easter holiday.

Bonds are rallying hard on the payrolls data, with prices up and yields plunging. We had begun to see the 10-year yield moving higher from that 2.00% level where it had been stuck for so long. But today we are back down to that key support area with the 10-yr trading near 2.03%.

Not much in the way of corporate news, but AOL (who still owns that stock?) did sell $1 billion worth of patents to Microsoft (MSFT).

Commodities are mixed, despite the dollar being lower. Oil prices are down near $104.40. Gold prices are higher to $1645, but silver and copper prices are down.

The VIX is seeing a big bounce, up 11% so far today back above its 50-day average to 18.60. Looks like we were stopped out of our VXX hedge a little early.

Trading comment
: The S&P 500 is down for a fourth straight day, which is about the most consecutive down days we have seen in the index since last November. Currently at 1379, that's about a 3% decline from the recent highs. I have been expecting a mild pullback in the 3-5% range, so we are now in that zone. The 50-day average for the SPX comes into play around 1371 while a full 5% pullback takes the index down to 1350. Of course, we could easily see something more but I think in that area buyers will step in and we will get a bounce. The key to determining if we will get a bigger correction this spring/summer is the tone of the ensuing bounce and if it is able to take the indexes back to new highs or if it runs out of steam and leaves a double-top looking formation. But in the near-term, I would be looking for a bounce in the markets.


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