Monday, September 17, 2012

Monday Morning Musings

Global markets are a bit sluggish this morning after another strong week last week amid investor enthusiasm over the last round of quantitative easing by the Fed. 

Overnight, Asian markets were mostly lower led down by a -2.1% decline in China after some local Chinese governments reintroduced property price controls in an effort to weed out speculative buying and cool their property markets.  This has some investors questioning further easing measures by the PBOC.

The Reserve Bank of India left its overnight interest rate unchanged at 8.00% while cuttings its reserve ratio 25 basis points to 4.50%.

In economic news in the US, the Empire Manuf Index came in at a very weak -10.4.  This is actually the lowest level since April 2009.  This may be one of the reasons that the Fed was willing to enact further QE despite the stock market near 5-year highs-- the economy has hit another soft spot and continues to offer weak datapoints.

The dollar is off a little and commodities are mixed.  Gold prices are flat near $1772 while oil prices are higher to $99.30.

After a big spike higher on Friday to nearly 1.90%, the 10-year yield is pulling back to the 1.83% range.

And the volatility index (VIX) is bouncing from very low levels to 14.80 this morning, up 2%.

Trading comment: The markets appear a bit extended after last week's spike higher.  I wouldn't be surprised to see some mild pullback and consolidation at these levels.  But I also think it is premature to start betting on more than a mild pullback until we see a change in the price volume action of the indexes.  We have been in a stair-step higher mode, and until we see some rallies that fail to make new highs and some selloffs that come on volume and take out support levels I think those betting against this market will continue to be frustrated - which is pretty much Mr. Market's primary objective.


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