Monday, November 26, 2012

Monday Morning Musings

After one of the best weeks for the market last week, stocks are pulling back in early trade this morning.  The market had become quite oversold coming into last week, so a bounce was not unexpected.  But now that we have seen a big bouce, we will have to see if more profit taking sets in or if buyers will look to add more stocks into month end which occurs this week.

There is not much market moving economic news this morning.  In corporate news, AAPL is bouncing after a Citi upgrade and a $675 price target.  Facebook (FB) is also spiking +8% after receiving a pair of upgrades and bullish comments about its upcoming quarter.

On the downside, DreamWorks (DWA) is down -5% after "Rise of the Guardians" disappointed with $32.4 million in box office sales this weekend.  That's too bad.  I took my kids to see it yesteday and we all liked it.

Retail stocks are mostly lower this weekend on mixed sentiment over Black Friday sales.  Utilities are bucking the early weakness and boucing after the drubbing the sector has experienced since Superstorm Sandy.

Asian markets were mixed to lower overnight as traders remained cautious ahead of another EU finance ministers meeting in Brussels today.  Morgan Stanley put a note out that it expects China's GDP to grow 8.2% in 2013.

Europe is lower this morning amid chatter that finance ministers are considering a haircut for Greek bondholders that could reduce the country's debt-to-GDP ratio to 70% by 2015, down from 120%.  Seems like a big haircut that might be hard to push through.

Commodities are lower as the dollar index remains in positive territory.  Oil prices are pulling back to $87.67 and gold prices are a tad lower near $1749.  Silver and copper prices are also slightly lower.

The 10-year yield is down to 1.64%.  It was unable to break above its 50-day resistance near 1.70% last week.

The volatility index is 4% higher this morning to 15.77, still a relatively lower absolute level.

Trading comment: The S&P 500 is now right in the middle of the range between its overhead 50-day and its 200-day support.  We sold half of our trading ETFs last week, and will likely exit the rest today.  If the bulls are ready to do more buying into month end this week, then I could see the SPX testing the underside of its 50-day near 1425.  But if this selling continues and it looks like traders are reducing equity exposure again then we could be back at the 200-day in a hurry.  The 200-day currently sits near 1383.  I think another test of the 200-day could set up a bounce but at SPX 1400 right now I think the market is in neutral territory.

KAM Advisors has long positions in AAPL, FB


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