Monday, March 04, 2013

Monday Morning Musings

Markets opened on a weak note this morning after some disappointing action overseas.  There were no notable economic releases in the US this morning.

Overnight, Asian markets were mostly lower after officials in China announced more measures to cool rising property prices.  The measures include restrictions on home buying, implementing higher interest rates on second homes, and more strict enforcement of the 20% capital gains law on home sales.

Last night there was also a cautionary piece on 60 Minutes about China and how its property bubble has led to ghost cities where buildings have been erected but nobody has moved in.  In reaction to the news, China's property index plunged -10% and the Shanghai Composite shed -3.7%.  Hong Kong was also -1.5% lower in sympathy.

European markets are mixed this morning.  The UK's PMI came in at 46.8, which was below expectations.  And Italy's government is still in limbo with the upper house deadlocked.

The dollar is slightly higher today and commodities are mixed.  Oil prices are weaker near $90.33 while gold prices are up a bit to $1576.  Copper is a tad lower while ag prices are mostly flat.

The 10-year yield is flat around 1.85%.  And the volatility index is up 2% this morning still above the 15 level around 15.65.

Trading comment: The S&P 500 was basically flat for the week last week.  Although there were some pullbacks along the way, dip buyers stepped in quickly such that the index usually closed near its highs for the day.  Overall this is constructive action for the bulls, and those waiting for a deeper pullback continue to be frustrated.  We continue to trim stocks that have had strong runups and appear to be extended in prices.  At the same time we have been willing to add to stocks that have pulled back or are exhibiting fresh breakouts.  This type of rotation looks set to continue.  Consumer staples stocks are the ones that look the most vulnerable to a pullback.


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