Thursday, November 08, 2012

Does The S&P 500 Have A Date With Its 200-day?

Markets opened higher but gave up those gains in the first hour of trading.  The S&P 500 bounced to 1401 but has given back about 10 points and is now trying to stabilize.  Yesterday's selloff came on pretty high volume, and it looks like the next level of support for the SPX will be near the 200-day average which currently sits at 1380.

Utilities (XLU) are bouncing the most, after selling off in the wake of Hurricane Sandy and the damage to East Coast electrical systems.  Financials (XLF) are also getting a bounce following yesterday's selloff.  BAC was upped to Buy at ISI, and JPMorgan got approval from the Fed to resume stock buybacks.

Stocks rising on earnings: QCOM, DF, AWK, TWGP, ETP, HE, AAP, AMCX, FE, DDS

Stocks falling on earnings: PANL, MNST, WFM, TRLA, VMC

In Asia overnight markets were sharply lower.  Hong Kong fell -2.4% and China skidded -1.6% following the handoff in power there.  Australia's unemployment rate held steady at 5.4%.  JPMorgan thinks the Reserve Bank of Australia will cut rates further in December.

In Europe, markets were higher this morning but have been fading.  Greece passed its key austerity vote yesterday in order to get more aid, but sentiment is souring that Spain will soon need to seek a bailout as well.  The ECB held rates steady at 0.75%, and President Draghi said that growth will remain weak in 2013.

The dollar is higher again, but commodities are holding up.  Oil prices are a bit higher to $84.80 and gold prices are firm near $1716.

The 10-year yield is getting a small boost to 1.67%.  And the VIX is lower by -3.6% to 18.38 despite the weak action in early trading.

Trading comment: The market sold off yesterday on strong volume.  It is now back at oversold levels so that should help it put together some sort of bounce in the near-term.  But the SPX is right in the middle of the range between its 50- and 200-day.  It hasn't touched the 200-day since June, and I think it is likely we see another test of that key moving average.  So I think a defensive posture remains appropriate and I would look to add to stocks and/or reduce hedges after we see a test of that 200-day.

KAM Advisors has long positions in AWK, FE, ETP


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