Market Suffers First 3-day Pullback in 2013

The market closed lower yesterday for a third consecutive day.  That was the first 3-day losing streak for all of 2013, a pretty rare feat.  For those that follow "bullish stampede" rallies, this was one of the longest ones on record but the 3-day losing streak brings it to an end.  Fortunately for the bulls, the history of these long stampedes is that after a rest the market usually continues to do well.

Yesterday the market sold off fairly hard after the bank levy tax was voted down in Cyprus.  This morning there are more headlines out of Europe regarding Cyprus.  Futures got a boost this morning after rumors crossed the wires that Russia was going to offer some aid of its own.  But this report was refuted by Russia.  Germany's Merkel said she expects Cyprus to make a new proposal to the Troika.

Here in the US the Fed completes its 2-day meeting today and will release its statement.  We expect to hear more of the same from the Chairman, and that they want to maintain low interest rates and accomodative monetary policy until there are more concrete signs that the economy is on solid footing and unemployment is going down.

The dollar is weaker today but commodities are mixed.  Oil prices are up to $92.66 but gold prices are lower ($1608) as are silver prices.  Copper prices are higher and ag prices are up a bit.

The 10-year yield is a little higher to 1.93% right about on its 50-day average.  And the VIX is down 11% this morning down to 12.75.  While the low levels in the VIX haven't been pointing to heightened volatility in the market, the VIX index itself has become more volatile lately, with 10% daily swings becoming more frequent.

Trading comment: Dip buyers stepped in yesterday when the market was at its lows such that by the close the markets had recouped about half of their losses.  This morning the markets are nicely higher.  After a 3-day dip a bounce should be expected.  The S&P 500 is only 8 points away from a new high.  If that level is recapture soon, it would be another bullish sign.  But I would not rule out a bit more sideways consolidation first.  We started to put some money to work in equities yesterday and will continue to do so on pullbacks.