Monday, February 04, 2013

Monday Morning Musings

Markets are trading lower in early trading, taking their cues from overseas where European markets are under pressure.  But I don't think we are entering another period where Europe will be driving sentiment for US markets.  Rather, we have talked about the market being overbought and overdue for a small pullback.  So today's news could just be the catalyst.

Earnings season is slowing down a bit, but there are still reports that will be coming in all week.

Stocks rising on earnings:  HUM, CLX, TDG, BRO

Stocks falling on earnings:  SYY, RCL, GCI, CYOU

Asian markets were mixed overnight.  China rose another 0.4% after its non-manuf. PMI rose to 56.2, its highest level since August.  But Europe's markets are down across the board, with selloffs in excess of 1.0%.

In Spain, the spotlight is on PM Rajoy as allegations swirl that he received as much as 250k EUR in regular payments from a secret swiss bank account.  And in Italy several banks are under scrutiny over questionable derivative deals.

In other news, Acme Packet (APKT) is spiking 22% after news that it will be acquired by Oracle (ORCL) for $29.25 a share.

The 10-year yield is lower today falling below the 2.0% level to 1.97%.  And the volatility index is spiking higher after a big plunge on Friday that took it back down in the 12- level.  Currently the VIX is 8% higher just below the 14 level.

Trading comment: Most traders and investors are looking for a pullback since the market has rallied so much already this year.  Often times the market doesn't do what the majority of people are looking for.  If that's the case, we could see this pullback again fall on the mild side of the equation as underinvested portfolio managers eagerly put money to work on signs of weakness.  This is the type of pattern that eventually brings out too much bullishness among investors which then sets the market up for a larger correction.  But we don't think we are there yet.


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