Monday Morning Musings

Although the market was not able to make much headway on Friday last week, it still ended the week with solid gains overall.  This morning markets are a bit weaker, but not by all that much.

The Treasury market is closed today for Columbus Day, so we won't get any read on interest rates.  The 10-year yield last closed at 1.74%.  There is also no economic data scheduled for release today.

The dollar index is trading higher, which is weighing on most commodities.  Oil prices are a bit weaker below $89.50, which has many wondering when the recent weakness in oil prices is going to translate into lower prices at the pump.  I know there isn't a one-for-one relationship, but we still should see some relief.  I saw prices as high as $5 per gallon recently outside of LA.

Gold prices are also lower near $1776.  Silver and copper prices are lower as well.

Overnight Asian markets were generally lower.  China fell 0.6% after many were disappointed that the PBOC didn't act all last week to lower rates.  Also, the World Bank slashed its 2012 and 2013 GDP estimates for China by 50 basis points each to 7.7% and 8.1%, respectively.

European markets are also lower across the board today after the Troika and Greece were not able to reach any settlement in recent negotiations.  Finance ministers are ready to active the European Stability Mechanism, however Spain still denies it needs any bailout.

Defensive issues are holding up the best this morning, with utility stocks bucking the early weakness and tech stocks lagging the most.  AAPL is down for a 2nd straight session, and the stock is now back below its 50-day average.  There have been rumors of riots, etc. at its Foxconn plant.  For what its worth, I still don't have my iPhone5 as the stores here are sold out every time I go.  I think I'll just suck it up and order it online and wait.

The VIX is up nearly 7% this morning to 15.30.

Trading comment: It still feels premature to call for a big pullback when the major indexes are just barely off their recent highs for the year.  Unless we see some real technical damage to the indexes, with more pronounced selling, it seems that the stairstep higher pattern that we have been seeing could remain intact.  This has been frustrating for those looking for a deeper pullback as one never seems to develop.  Meanwhile, the group rotation between defensive stocks vs. growth stocks continues.  With AAPL taking a back seat the last few session, defensive stocks could be seeing some flows.  But I doubt this lasts too long.

KAM Advisors has long positions in AAPL