Wednesday, May 16, 2012

Still Looking For Upside

The market is getting a bounce in early trading, but it still needs to pick up some steam as the day wears on to have a real impact.  We did get some positive economic reports today which seem to be helping. 

Both Asian and European markets were both down overnight, but our market seems to be shrugging it off.  The euro is getting a small bounce today, which isn't surprising given the 10-day tear the dollar has been on.  Look at the chart of UUP to see what I'm talking about.

The relative weakness in the dollar today isn't helping commodities much.  Gold prices are still struggling to hang on to the $1550 level, and oil prices have dipped below $94 on demand concerns due to slowing economic growth.

On the earnings front, a handful of retail stocks have reported earnings with mixed reactions.  Target (TGT) beat estimates and its stock is higher, but ANF, JCP, and SPLS are all lower after reporting.

In economic news, industrial production for April grew by 1.1%, which is higher than expected.  And capacity utilization was slightly above expectations at 79.2%.  Also, housing starts increased in April to a rate of 717,000 units from 699,000 the prior month.

Later today we get the minutes from the last FOMC meeting.  I don't expect any surprises here.  Probably just more of the same debate over how much additional stimulus is needed vs. when the Fed should start removing said stimulus. 

The 10-year yield is up a touch to 1.80%.  And the VIX is down -3% to 21.25.

Trading comment: Yesterday's late action was disappointing.  That's not what you want to see.  Markets that open strong and close weak are the definition of a market that is not ready to rally.  Let's see if today can change that pattern.  We opened higher today and need to build on the gains into the close.  The S&P 500 needs to get above yesterday's high of 1445 just to change the near-term trend.  And above 1350 gives the market a shot at its overhead 50-day near 1384.  As for the Nasdaq, the 2900 level has held very well.  One stock that stands out today is Google (GOOG) which is retaking its 50-day average today on solid volume.  GOOG is regaining some respect after the Facebook IPO documents highlight the potential for mobile advertising and the fact that FB will come public at a price-to-sales multiple far higher than GOOG.

KAM Advisors has long positions in GOOG


Post a Comment

<< Home