Market Could Be Ready For A Bounce

The markets are down again in early trading, and getting a bit oversold.  The Dow has been down for six straight days and the markets could be due for a short-term bounce.

The news today is more of the same.  The concerns out of Greece now focus around the prospect that they will not get another bailout and will actually exit the euro.  This was the story that was making the rounds yesterday, and the manager of one of the largest currency hedge funds said he tough it was likely to occur this summer.

Earnings reactions have been a mixed bag lately. 

• Stocks rising on earnings reports today include: DIS, DF, EZCH, and SODA. 
• Stocks falling on earnings include: M, FCN, AGU, TEVA

The dollar continues to bounce vs. the euro, which is hurting commodities.  Oil prices have been down below the $96 level today, while gold slips further below the $1600 level to $1587.

Asian markets were down across the board overnight.  The flight-to-safety trade is only occurring in Treasuries, which is pushing the yield on the 10-year down to 1.81%.

As for the VIX, it has broken out to new highs today above the 21 level but looks poised to reverse.  I still expect the VIX to pull back from these levels in the near-term, but if we get a deeper correction down the road it still has plenty of room to run.  Remember last summer the VIX spiked as high as 48.

Trading comment: The Dow has been down for six straight days, and the S&P 500 is basically the same.  The SPX has now pulled back more than 5% from its April highs.  That is pretty much an intermediate correction and I wouldn't be surprised to see a bounce in the near-term.  Also, yesterday I mentioned the March lows at SPX 1340 as next support.  The SPX touched 1343 this morning, which is close enough for govt. work.  As such, I am covering some of our hedges and decreasing our short exposure in anticipation of a bounce.  I think it is likely to just be an oversold bounce, so I plan to add back to our hedges from higher levels.

KAM Advisors has long positions in EFZ, SH