Monday, January 28, 2013

Monday Morning Musings

The markets are mixed in early trading.  The S&P 500 is showing a modest pullback from its overbought condition while the Nasdaq is getting a boost from a rebound in AAPL this morning.  It's hard to say if AAPL has bottomed for sure, but the volume of selling last Thursday and Friday does lend itself to that notion. 

In economic news, durable goods orders came in much better than expectations rising +4.3% in December.  Much of that was due to new aircraft orders, but even ex-transportation durable goods rose 1.3% which was better than expected.

Pending home sales declined 4.3% in December, which was below expectations.  I wonder if some of this was due to the fiscal cliff uncertainty that included questions about the sustainability of the mortgage interest deduction.

A couple of notable names trading higher after reporting earnings this morning include CAT and BIIB.

Asian markets were mostly higher overnight, led by a 2.4% rise in China after a PBOC governor expects the country's GDP to reach 8.0% in 2013.  Standard Charter sees 8.3%.  In Japan, the cabinet is looking for 2.5% GDP growth this year, which would be a big rebound.

Europe's markets are seeing little change so far.  An ECB member said the Eurozone would have to fall back into recession before they lowered interest rates further.  Aren't they basically in recession now??

The 10-year yield is bouncing again as the rotation out of bond funds continues.  The yield hit 2.00% this morning, which is a 9-month high and above recent resistance. 

And the volatility index is breaking above its recent range also, rising +7% this morning to the 13.75 level.  That's still a low absolute level, but the VIX may have bottomed for now.

Trading comment: Last week we commented that the S&P 500 was overbought on several different indicators we follow.  But that didn't stop the market from reaching new multi-year highs on Friday.  This morning's weakness could be the start of a small pullback, but we will have to see how the market closes.  So far this year, every intraday dip has been bought into and by the close the market tends to rally back.  Let's see if that patter surfaces again today. 

KAM Advisors has long positions in AAPL


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