Stocks Poised For Further Highs

The market pulled back in early trading this morning but the dip proved brief as the indexes have already started to climb back into positive territory.  The major indexes are poised for more new highs, and the S&P 500 approaches the 1600 level.

Normally you would expect investor enthusiasm to be reaching very high levels with the market rallying like this, and speculation running rampant.  But a recent look at several investor sentiment surveys reveals that is far from the case.  Most of the surveys we track have showed more bears than bulls in the polls for the last few weeks.  That is a very odd occurrence, and tells us that most investors don't trust this rally.

Of course, the market would more likely to top if investor complacency was near its peak.  But with optimism running somewhat low, it looks more like the market can keep climbing the proverbial 'wall of worry' in the near-term.

Economic data was solid this morning.  The Case-Shiller home price index for February rose 9.3% on top of an 8.1% gain in the previous month.  And March's number is likely to be strong as well.  The latest consumer confidence reading rose to 68.1 from 59.7 last month.  And the Employment Cost Index cooled to 0.3% in Q1 from 0.5% last quarter.

Earnings season is still in high gear with roughly 100 companies reporting last night and this morning.

Stocks rising on earnings: ESRX, DDD, HIG, SU, AMG, DPZ, ECL, HCP, NEE, HOT

Stocks falling on earnings: FN, JEC, MAS, NEM, CMI, DBD, MPC, NUAN, PFE, BWLD

Asian markets were mostly higher overnight.  China remained closed for a holiday.  Taiwan's GDP fell -0.8% last quarter.  And the Bank of Korea governor said that the effectiveness of global quantitative easing policies is decreasing.

Europe's markets are mostly lower today.  German retail sales fell -2.8%.  Italy's unemployment remained at 11.5%, while Eurozone unemployment ticked higher to 12.1%.

The 10-year yield is up slightly to 1.67%.  And the VIX is basically flat at 13.75.

Trading comment: No change to recent comments about our strategy here.  We continue to want to add selectively to equities by focusing on companies that reported solid earnings recently.  We prefer not to bottom dip in stocks that recently disappointed and saw their stocks have big drops.  More often those weak quarters persist into next quarter and the stocks continue to lag.  We prefer to focus on those stocks that continue to lead the market.  In Q1 that was mostly defensive type stocks, but we are on the lookout for more growth stocks to start to resume their leadership.  AAPL is back above its 50-day average after strong demand for their debt offering which will fund their increased buyback and dividend strategy.

KAM Advisors has long positions in AAPL, ESRX, DDD, NEE, PFE

Monday Morning Musings

The markets are shooting higher out of the gate this morning with the S&P 500 getting nearer to new highs again.  This morning the SPX topped the 1590 level, but it needs to hit 1598 for a new high.  That doesn't look like it will be today's business but we wouldn't be surprised to see it soon.

In economic news, pending home sales rose a better that expected +1.5% in March, which it a 3-year high for this datapoint.  Homebuilder stocks are higher again today.

There were a handful of earnings reports this morning:

Stocks higher on earnings: ETN, HNT, MCY

Stocks lower on earnings: L, ROP

Asian markets were mixed overnight, but both Japan and China were closed for holidays. 

Europe's markets are higher today after the new Italian government was sworn in over the weekend.  Elsewhere, Spanish retail sales fell -8.9% and a Eurozone business and consumer survey declined to 88.6 from 90.1.

The dollar is lower today helping to boost commodities.  Gold prices are higher near $1466.  Oil prices are up to $93.65.  Ag prices, silver and copper are all higher today also.

The 10-year yield continues to languish near low levels around 1.66%.  And the VIX is down 1% today near 13.50.  As we have been saying recently, when the VIX closed below the 15 level again it was likely an indication that traders were expecting more rallies in the market.  Of course, selloffs have been few and far between thus far in 2013.

Trading comment: Buy the dip remains the only mantra that has worked this year.  Of course, many strategists continue to look for that 5-10% pullback that has proved elusive thus far.  The most recent dip was more of the 2-3% variety.  Beneath the major indexes we continue to look for companies that reported solid earnings and whose stocks either pulled back after an initial spike higher, or those stocks that are retaking their overhead 50-day averages and putting themselves in position to  work higher.  AAPL is getting closer to testing its 50-day again, which could open up some running room for the stock to work higher.

KAM Advisors has long positions in AAPL

Recent Bounce In Stocks Came On Light Volume

The stock market is slightly lower in early trading on the heels of a solid 3-day bounce.  But for the most part volume levels have been relatively light on these rallies.  Investors prefer to see volume lighten up on selloffs and then pickup during rallies.  That signals some conviction behind the buying.  Yesterday's volume was slightly higher, but the AP Twitter glitch likely boosted volume figures.

Earnings reports continue to roll in, with this probably being the busiest week.  The big report last night was obviously Apple.  AAPL beat on the top and bottom lines, but gross margins were a little light and guidance for next quarter was pretty conservative (below consensus).  That said, I was surprised that the company sold as many iPhones as they did (37.4 million) given how everyone thought that number was going to be weak.  iPads sold was also solid. 

And the capital return was pretty good also.  AAPL boosted their stock buyback from $10 billion to $60 billion.  That's a big jump and the buyback should start soon, which could help put a floor under the stock.  Also, management upped the dividend by 15% pushing the current yield on the stock to 3.0%.  That's a pretty solid yield and I think one that long-term investors will find attractive.  AAPL now trades at less than 10x next year's earnings, a discount to its growth rate.  Seems like a pretty good bet at these levels.

Stocks rising on earnings: BRCM, USNA, YUM, GD, BA, LO, LL, NOC, WM, WLP, TMO

Stocks falling on earnings: AMGN, T, CREE, AWAY, JNPR, PNRA, VMW, LLY, PG, TROW, TUP, WHR

Asian markets were higher across the board overnight.  The Reserve Bank of New Zealand held its key rate steady at 2.50%.  S&P said Australia runs the risk of losing its 'AAA' rating if it doesn't start to show more commitment to reducing its budget deficit.

Europe's markets are mostly higher, while Italy continues to underperform.  The German business climate index fell to 104.4 from 106.7 last month.

Commodities are higher today as the dollar index is weak.  Oil prices are up to $90.33 and gold prices are higher near $1426.  Copper prices are bouncing today also.

The 10-year yield is up just a touch to 1.71%.  And the VIX is flattish near 13.55.

Trading comment: Earnings season continues to be a mixed back for the most part.  The list above shows as many stocks falling on earnings as rising.  That makes it tough to try to game a stock's earnings report.  We prefer to focus on stocks that report solid earnings reports and then look to buy or add to those stocks on pullbacks.  Leadership in this market has mostly come from defensive sectors like healthcare, utilities and consumer staples.  If the market remains strong, we would expect more traditional growth stocks to start to take a leading role.

KAM Advisors has long positions in AAPL, AMGN, LL

Stocks Rally For Third Consecutive Day

The markets are really strong out of the gate this morning.  Of course readers know I prefer a market that starts out weak and ends strong, so we will have to see if this rally holds up into the finish.  Sometimes when markets are too strong too early it gives bears ample time to try to knock the market lower.

The new home sales report was very strong this morning at 417,000 units.  That's the highest rate we've seen since the fall of 2008.  Homebuilding stocks are rallying on this data.

We also had a bevy of earnings reports last night and this morning, and it looks like we are seeing more positive reactions to earnings than negative right now.  To wit:

Stocks rising on earnings: NFLX, VECO, TXN, COH, LMT, TRV, WAT, PNR, DD

Stocks falling on earnings:  UTX, R, PCAR, CIT

Asian markets were down across the board overnight, led lower by China after some disappointing economic data.  China's HSBC Manuf. PMI fell to 50.5 from 51.6 last month and the weak export component suggests slowing demand for Chinese goods.

In Europe markets are higher despite some weak PMI reports.  Frand and Germany both reported weaker manuf PMI readings while the overall Eurozone PMI slipped to 46.5 from 46.8.  All of the PMI readings this morning were below 50 which suggests further contraction in the manuf. sector.  Also, the president of the ECB said that the policy of austerity "has reached its limits".

The dollar index is higher today and helping to push commodities lower.  Oil prices are down a touch to $88.35.  Gold prices are lower near $1410.  Copper prices are also lower, as are most ag prices.

The 10-year yield is roughly flat near 1.70%.  And the VIX reversed lower yesterday and is moving lower again today down to the 13.70 area.  Another close below the 15 level would be a welcome sign to the bulls.

Trading comment: We mentioned recently when the S&P 500 was testing its 50-day average that with so many investors looking for any pullback to get more invested that it would not be all that surprising to see dip buyers step in fairly quickly.  That seems to be the case so far as the SPX has bounced from that test of the 1540 level and is currently topping 1575.  The one red flag is that these rallies have come on lighter volume, which would cause us to question the conviction behind the buying.  But you can't ignore the price action.  The recent highs in the market were SPX 1597.  But I would expect to see a little more backing and filling action before the market is ready to breakout to new highs again.

Monday Morning Musings

Markets were higher only briefly after the opening bell today, but have since slipped back into negative territory.  The Nasdaq is still slightly higher thanks to AAPL and MSFT which are both higher today.

In economic news, March existing home sales hit a rate of 4.92 million units which was below expectations.  Homebuilding stocks are weaker today on this news.

Earnings reports continue to roll in, and it will be a busy week this week.  Probably the biggest report investors are waiting for is AAPL on Tuesday evening.  A few stocks trading higher this morning after report earnings include HAL, BEAV, and SIX.  Stocks trading down after earnings are CAT and PHG.

Asian markets were higher across the board overnight.  China was flat after reporting that non-performing bank loans rose 20.7% in March.  Japan rallied 1.9% after the G20 meetings failed to accuse the country of devaluing its currency.  In Taiwan, the unemployment rate held steady at 4.2%.

European markets are also higher today after Italy finally elected a president, 87-year old Giorgio Napolitano.  Elsewhere, ECB members have commented that the ECB could cut rates further if economies continue to deteriorate.

The dollar is a bit higher this morning and commodities are mixed.  Precious metals are higher with gold trading up to $1420.  But copper prices are lower again.  Oil prices are also down a bit to $87.90, and ag prices are lower today as well.

The 10-year yield is down to 1.68%, testing last week's low of 1.67%.  And the volatility index bounced from that 15 level that we have been citing  to 15.80 currently.

Trading comment: The market gave back its early gains, but so far the selling pressure hasn't been to great.  It will be a battle today with bulls trying to defend the SPX 1550 level and bears trying to push it back below its 50-day average (now near 1544).  As to whether the market still has more work to do in this most recent correction, we are leaning towards that being the case.  But we are also mindful of the fact that a LOT of investors have been looking for any pullback to put more money to work in equities, so it wouldn't be all that surprising if these folks got impatient and started buying sooner rather than later.

KAM Advisors has long positions in AAPL

S&P 500 Bounces From Technical Support Levels

The markets are bouncing this morning after the S&P tested some key technical levels yesterday that we discussed.  Of note is that the Dow is down while the S&P is up due to the fact that a few big stocks like IBM, MCD, and GE are all trading lower after earnings and dragging the Dow into negative territory.

Getting back to the SPX, yesterday we talked about a test at the 50-day average around SPX 1543 and said that we could get a bounce from that level.  Also, the SPX has tested that 1540-ish level three times now.  So we could get more of a bounce in the short-term, but its hard to tell at this point if the recent correction is finished or has more work ahead.

Earnings reactions have been mixed and volatile again, with some big swings.

Stocks rising on earnings: GOOG, BGS, HON, CMG, MSFT, COF, ALGN, VMI

Stocks falling on earnings: IBM, GE, MCD, ISRG, WIT, BHI, SAP, STT, BGG

Markets in Asian ended higher overnight led by Hong Kong and China.  Although Goldman Sachs lowered its GDP expectations for China in 2013 from 8.2% to 7.8%.

Europe's markets are also higher this morning despite some weak industrial production figures in Italy and Spain as well as the continued inability for Italy to elect a new president.

Commodities are higher with oil prices up to $88 and gold back above the $1400 level just barely.

The 10-year yield is higher to 1.70%.  And the VIX which topped 18 yesterday has reversed lower and is down another 13% back near the 15 level. 

Trading comment: This is a nice bounce today, but will need to see some follow through to sound the all clear signal.  We think it is more likely that the market continues to chop around these levels and build a new base.  The reactions in normally steady stocks like IBM show how risky it can be to buy individual names ahead of their earnings reports.  Our strategy remains to wait to see how stocks react to earnings and to buy stocks that report solid earnings and react positively, preferably on pullbacks.  After any correction usually a new group of stocks emerges to lead the next rally and that is what we are watching for.

KAM Advisors has long positions in BGS, GOOG, IBM

S&P 500 Testing 50-day Support

The markets started out lower this morning, but so far have already staged a nice bounce in early trading.  As we have said, its how the market closes on the day that is really key.  So we will have to see if this early bounce has legs.

The S&P 500 it testing its 50-day average for the second day.  This is often a level where buyers step in and we could see the market bounce from here.  But if the SPX closes below its 50-day for more than a day that often signals that the market still has more work to do before finding support.

In economic news, leading indicators for March fell -0.1%.  The Philly Fed index slipped to +1.3 from +2.0 last month.  And weekly jobless claims rose to 352,000 from 348,000 last week.

Earnings reports continue to roll in.  Results from last night and this morning appear to be a mixed bag in terms of looking for a trend.  Tonight we hear from bellwethers MSFT and GOOG.

Stocks rising on earnings: CVA, VZ, PEP, SHW, UNP, APH

Stocks falling on earnings: MS, PM, EBAY, SNDK, BX, FCX, UNH

Asian markets were mixed overnight.  India rallied again while Japan was lower.  In China, home prices rose +3.6% last month.  Hong Kong's unemployment rate ticked up to 3.5%.  And the Nikkei News is suggesting that the Bank of Japan may hike its inflation expectations at its upcoming meeting.

Europe's markets are higher this morning on no real news.  The Italian parliament failed to elect a president at its recent vote.  And German's Merkel fell short of reaching a coalition majority vote regarding the Cyprus bailout.

The 10-year yield is lower again to 1.69%.  And the volatility index was higher this morning to as high as 17.87 which is just below yesterday's high.  It has since fallen back to 16.75.  We have been discussing the low VIX for weeks and saying we would expect a spike back above the 15 level.  I think the buying signal will come when the VIX moves back below the 15 level convincingly.

Oil prices are slightly weak today near $86.55.  And gold prices are a bit higher around $1395.

Trading comment: As we mentioned above, the SPX is testing support at its 50-day average (1543) and could bounce.  But most of the other leading indexes (Russell small-cap, mid-cap, and Nasdaq) remain below their respective 50-day averages which is usually a sign investors should be a bit cautious.  A better signal is when all the indexes are back above their 50-days.  And in terms of individual stocks its always risky to buy ahead of their earnings reports, since the reactions in stocks can be so unpredictable.  We would rather wait to see which companies report solid quarters and then look to add to those on pullbacks.  But when the market finds its footing, those stocks are likely to be the ones that fare the best in an ensuing rally.

KAM Advisors has long positions in CVA, VZ, MS, PM, GOOG

Fear Rising In Aftermath of Boston

Busy morning already, which is why this post is later that normal.  The markets are sharply lower in early trading on little economic news.  But there have been a handful of earnings reports coming out, and none of them has contained a big upside surprise.

The volatility index is spiking +23% back above the 17 level today.  I think fears are being exacerbated by the news coming out surrounding additional suspicious packages being found at the White House as well as two letters that tested positive for ricin.  While not exactly like post-9/11, it is likely sparking memories of that and spooking folks.

In China there are continued reports of a new bird flu spreading, and we remember how the markets didn't like the H1N1 flu epidemic when it was spreading.  China is already struggling with slowing growth, and if folks over there panic about this bird flu it could hit their economy.

Asian markets closed mixed overnight.  A former Chinese official spoke and described local government debt levels as 'out of control'.

European markets are lower across the board today.  UK unemployment rose to 7.9% and there are rumors that Germany and/or France could be the subject of sovereign debt downgrade.

In earnings news, we are seeing more stocks trade lower after reporting that trade higher.

Stocks rising on earnings: ABT, MAT, PNC, DGX

Stocks falling on earnings: INTC, BAC, YHOO, URI, CSX, BMI, TXT

The 10-year yield is lower to 1.69%.  The dollar is higher today, and most commodities are lower.  Oil prices are lower to $86.90, and copper prices are also down sharply.  Gold prices are holding up and are nearly unchanged around $1386.

Trading comment: After Monday's sharp selloff and the small-cap index breaking below its 50-day average, we thought there would be more consolidation in the market.  Yesterday's rally now looks more like just a short-term bounce that came on lighter volume than Monday.  We thought the S&P 500 could test its 50-day average, and today it is within striking distance of that support level.  So far the SPX is -3% off its recent highs.  We figured the market was due for a 3-5% correction, but think it would probably bounce from there.  So in this SPX 1520-1550 level we want to look for opportunities to add to stocks.  Our hope is to find stocks that report great quarters but don't take off due to the overall weak market.

KAM Advisors has long positions in BAC

Earnings Estimates Diverging From Price Action

Stocks Bounce In Early Trading

The market is bouncing back from yesterday's sharp selloff in early trading.  Most people might think that the tragedy in Boston was the culprit for yesterday's weakness, but the market was already down quite a bit before the horrific event unfolded.

Yesterday gold prices plunged $100, the most in decades.  Either some large funds are in trouble and being forced to liquidate positions, or someone around the globe is fearing some big time deflation around the corner.  I tend to fall more in the former camp.  Today gold is bouncing $20 back near the $1380 level.  We have some positions in gold but would likely be sellers on a further bounce.

In economic news, housing starts hit 1,036,000 units in March which was above expectations.  And industrial production was also slightly ahead of estimates at +0.4% in March.

Earnings reports are starting to roll in and are a bit of a mixed bag so far today.  BRO, KO, and JNJ are trading higher after reporting while HCA, BLK, and GS are trading lower on their results.

Asian markets were mixed overnight.  India was higher on hopes the Reserve Bank will cut interest rates soon.  China was also higher despite Moody's lowering the country's outlook from positive to stable.

Europe is roughly flat today.  Germany's economic sentiment index fell to 36.3 from 48.5 last month.  And the eurozone economic sentiment index fell to 24.9 from 33.4. 

The 10-year yield is up slightly to 1.71%. But the volatility index (VIX) is seeing some volatility of its own.  Yesterday it surged +40% to close above the 17 level and today its back down -15% back below the 15 level.  Big swings.

Trading comment: Its still early in the trading session, so this bounce has to endure until the close to be meaningful.  It's more likely that this is just a bounce back after a big selloff and that the market likely still has more consolidating to do.  The mid-cap index is right at its 50-day average and the small-cap index is below its respective 50-day, so those bear watching.  We wouldn't be surprised to see the S&P 500 test its 50-day at some point, but then again nothing is too surprising in this market.  Earnings season continues to heat up this week and next so that could add some color to the mix as well as some additional volatility.

KAM Advisors has long positions in KO, JNJ

Monday Morning Musings

Markets are lower in early trading following weakness in overseas markets.  This morning's economic data was also weaker than expected and is not providing any boost.  And the commodity selloff continues today in earnest and is likely exacerbating fears in the market.

In economic news, the Empire Manuf. index for April came in at 3.1, which is down from the prior month's reading of 9.2.  Also, the NAHB housing market index fell to 42 from 44 last month and that has homebuilding stocks trading lower today as well.

Last night it was reported that China's 1Q GDP grew 7.7% while the consensus  expectations were for growth of 8.0%.  Anytime we hear news that China may be slowing down it spooks investors and most Asian markets trade lower.  It also didn't help that 13 people have been reported to have died from bird flu.

In Europe markets are also lower.  Weekend reports suggested that German Chancellor Merkel might retire from her post in 2015.

In M&A news, Dish Network offered to buy Spring for $25.5 billion, a 12.5% premium to Friday's close.  And Thermo Fisher (TMO) offered to buy Life Tech (LIFE) for $76, a 12% premium.

In earnings new, Citi topped estimates and is trading higher this morning.  That is helping the financial sector withstand some of the selling this morning.  Commodities are getting hit hardest and that is pushing the energy and materials stocks down the most so far.

Gold is plunging for a 2nd day.  So far the price of the yellow metal is down more than $100 today below the $1400 level.  Silver is also getting hit hard, and copper is down but not as much.  Oil prices are lower as well, below the $89 level..

The 10-year yield is a bit weaker near the 1.71% level.  And the volatility index is up 7% to around the 13 level.  I would have expected to see a bit more of a spike.

Trading comment: So far the technical damage in the market is mild.  The S&P 500 is down for a second day, but still barely off its all-time highs.  The small-cap Russell index is down more, and testing its 50-day support.  Since the Russell has been a leading index this year, its action bears monitoring.  But this selloff looks kind of like another sector rotation with energy and materials stocks being sold, but financials and healthcare stocks being accumulated.  Big picture we are letting stocks consolidate a bit more and then looking for opportunities to add to positions.

KAM Advisors has long positions in C

Commodities Take It On The Chin

Markets are weak this morning after being higher for the last 4 days.  The big dislocation is in the commodities markets, where prices are down sharply today.  This isn't due to a gain in the dollar index either, as the dollar is roughly flat.  I'm not sure the exact catalyst, other than concerns about global growth.

Oil prices are down to $90.75.  Gold prices are taking it on the chin and all the way down to $1507.  Silver prices are down 4% and copper prices are weak as well.  Ag prices look like they are bucking the weakness so far.

Economic news this morning wasn't great either.  March retail sales declined -0.4% vs. expectations for a flat reading.  And the Univ. of Mich consumer survey came in below expectations at 72.3 from 78.6 last month. 

Bank earnings this morning were mixed.  JPMorgan and Wells Fargo both reported results that beat EPS estimates but revenues were a bit light.  And net interest margins were nothing to write home about.  The stocks are both modestly lower so far.

Among the sector ETFs, energy and materials are by far the weakest sectors while defensive utilities are actually higher on the day. 

Asian markets were mostly lower overnight, led by a -1.6% decline in India after Infosys (INFY) lowered guidance.  Shares of INFY in the US are down 20% this morning-- ouch.  Singapore reported GDP decline -0.6% vs. +0.5% consensus.

European markets are also lower today.  In Spain, the Catalonian minister said it is impossible to implement the 5 billion euro cuts required to reach the 2013 deficit target.

Bond yields are lower today with the 10-year Treasury falling back to 1.73%.

The volatility index is up 6.5% back to the 13 level, but we could be in store for another trip up to the 15 level.

Trading comment: After the strong multi-day runup a pullback in the market was certainly in order.  The news from the banks was not horrible, and actually Wells made some positive comments about the housing market.  Commodities are getting crushed, but I haven't seen any specific news that would justify the sharp selling, so it could be technical in nature.  Earnings season heats up next week, so we should hear from more companies about their outlooks.  But so far my guess is this is just another mild pullback that dip buyers will look to take advantage of before long.

KAM Advisors has long positions in JPM, WFC

Up, Up, and Away?

The S&P 500 has broken its patter of one up day, one down day.  That choppiness last for 13 days which is a very long streak.  But then the breakout higher came and we have been up for 4 days in a row.  That puts the market in short-term overbought territory, but it still hasn't paid to get bearish yet.

Retail stocks are leading the action this morning after same-store sales results were released.  BBBY reported solid earnings results, and ROST topped sales expectations and raised guidance for this quarter.

On the downside, tech stocks are lagging after industry data from IDC pointed to a 14% decline in first quarter PC shipments.  Microsoft is down nearly 5% on this news combined with a downgrade from Goldman Sachs.

Asian markets were mostly higher overnight, expect for China which was down slightly.  Bird flu concerns are still an issue in China, and the chinese press reported that small business optimism on the country's economic outlook is low.  Australia's unemployment rate ticked higher to 5.6%.  The Bank of Korea and Bank of Indonesia both held their key interest rates unchanged.

European markets are modestly higher.  Greek unemployment rose to 27.2% in January.  And Eurozone officials have indicated the Cyprus bailout will be approved Friday with the first tranche of aid likely to come in May.

The 10-year yield is slightly lower at 1.78%.  The VIX is up a bit to 12.55.  For most of the year the VIX has oscillated in the 12-15 range, so those are the levels to watch for excessive optimism or pessimism.

Trading comment: The market bounce continues.  Folks are likely emboldened by new all-time highs in the S&P 500, and bears likely had that level as a stop level to cover shorts.  In the short-term, the market likely needs to do some consolidating again.  But it has not paid one bit, and has actually cost you if you've been waiting for a 10% correction.  I'm sure at some point we will have one, but it is unclear from what level in the market it will commence.  If I had to go out on a limb, I would say we don't see one until summer if at all.  Growth stocks have started to act better lately, and that is a good sign.  A market that is led by defensive issues usually doesn't have the same staying power.

KAM Advisors has long positions in BBBY, ROST

Break Out The Party Hats

The S&P 500 has been hovering near new highs for quite some time now.  But today it has finally broken above its 2007 intraday high of 1576.  If we close at these levels, I would expect a fresh round of media headlines saying "Market Closes At New Record Highs".  And that should make Joe Investor feel like he's missing out on a new bull market and look to put some money to work.  Funny how higher prices have a way of making folks feel better about investing, when it should be the opposite.

Today's FOMC minutes got released early, but showed that most members maintained their stance that current asset purchases are likely still beneficial.  There are a few members who are beginning to question whether the cost of the programs will start to outweigh the benefits and risks.

Asian markets were mostly higher overnight.  Chinese imports surged +14.1%, but the Shanghai market still closed flat on the session.  Japan continues to trade higher.  And tensions continue to run very high in Korea where Pyongyang might be set to carry out another missile test.

Europe's markets are higher led by a 2.4% spike in Spain.  French industrial production rose 0.7%, Spain industrial production fell -6.5%, and Italy's declined -0.8%.  The Troika has proposed granting Ireland and Portugal 7-year extensions on their bailout loans.

The dollar index is up slightly.  Oil prices are down a bit near $94, gold prices are weaker to $1569, and silver and copper prices are lower also. 

The 10-year yield is rising to 1.79%.  And the volatility index is roughly flat around 12.83.

Trading comment: The stairstep patter continues, something that we feel like we have been saying all year.  While the markets remain overdue for pullback, what we have seen is more of a sector rotation among stocks so that diff groups of stocks have had corrections at different times but not the overall market all at one time.  Yesterday the small-cap index didn't participate in the rally, which is normally a red flag.  But today the party hats are on, the markets are making new highs, and talk of a correction is being put on the back burner for the time being.  Let's hope next week's earnings reports are good or this market could get hit.

Market Bounces But On Lower Volume

Stocks bounced back yesterday with a late day rally that pushed the indexes to solid closing levels.  The mid-cap and small-cap indexes closed back above their respective 50-day moving averages.  But the gains in the market came on lower volume.

This morning markets are roughly flat.  Energy and materials stocks are strongest while yesterday's winner consumer staples is lagging today.

Last night Alcoa reported earnings, which is generally viewed as the start to earning season.  The company issued a mixed report, and it doesn't seem to be coloring the action so far today.  Friday we hear from two of the largest banks, which investors will be paying attention to.  But next week we will start to hear from more companies and get a sense about forward guidance from them.

In other interesting news, JC Penney ousted CEO Ron Johnson.  I was surprised by this news.  I knew JCP was doing awful, but I thought the board was giving him more time to execute on his vision.  I think the big difference was that at Apple Ron Johnson had products that the public clamored for.  So of course the stores were a big success.  But at JCP there is no product in high demand, so it doesn't really matter how cool the stores are.

Asian markets were mixed overnight.  As China tries to cool property prices is may start requiring larger down payments for second homes.  Recently introduced measures have resulted in weekly transactions falling 68% for existing homes.

Europe's markets are trading with modest gains.  Germany reported a trade surplus while France reported a larger than expected deficit.  Swiss retail sales rose 2.4%.  And UK industrial production rose more than expected 1.0% last month.

The dollar is down a little today, which is helping commodities.  Gold prices are higher near $1587.  Silver and copper prices are also higher.  Oil prices are flattish around $93.35.

The 10-year yield is barley positive at 1.73%.  And the VIX is up a touch to 13.38 after reversing lower yesterday afternoon.

Trading comment: The small- and mid-cap indexes aren't yet participating in this morning's bounce.  And while they closed above their 50-days yesterday, the bounce came on lower volume which means the rally lacked conviction.  I would say the jury is still out, and if these leading indexes turn tail and move back below their 50-days it indicates that the market has more work to do consolidating its recent gains. 

Monday Morning Musings

The markets are lower in early trading following Friday's bounce from the lows.  There isn't too much in the way of market moving news this morning.  The big M&A news is GE buying Lufkin Industries (LUFK) for $88.50 a share, which is a 38% premium to Friday's close.

This week also kicks off earnings season.  Alcoa is set to report earnings after the close today, but the 2 biggies investors are waiting for are on Friday when JPMorgan and Wells Fargo report.

Asian markets were mixed overnight.  Japan continues to rally as export stocks climb and the yen weakens in response to the BoJ QE initiative.  Trading in Japanese govt bonds had to be halted for the 2nd consecutive session after volatility tripped the circuit breakers.  China closed at its lowest level of the year after concerns over a new bird flu are spreading.  So far it has been reported that 21 people have contracted the bird flu in recent weeks.  Restaurants with chicken exposure could see weak sales in the near-term.

European indexes are mostly higher. German industrial production rose 0.5%.  But the Eurozone Sentix investor confidence index fell to -17.3 from -10.6 last month.  Lastly, Portugal's constitutional court ruled some of the EU-imposed austerity measures are unconstitutional.

So far defensive consumer staples stocks are bucking the weakness while healthcare stocks are lagging.

The dollar is up a bit today, and commodities are mixed.  Precious metals prices are lower with gold down slightly near $1572.  But oil prices are higher ($93.20) as are ag prices and copper.

The 10-year yield is bouncing just a little bit after Friday's extreme weakness to the 1.71% level.

And the volatility index is still trading below the 15 level currently up 3.3% to 14.38.

Trading comment: The S&P 500 looked like it was headed for a test of its 50-day moving average on Friday before dip buyers stepped in and the index rallied late in the day.  But the Nasdaq index and the Mid-cap index are both right at their 50-day support, while the Russell 2000 small-cap index has broken below its 50-day.  In addition, many leading stocks have either started to break down or remain sufficiently extended that they need to further consolidate recent gains.  As a result I expect the market to continue to be choppy in the near-term without much of an edge going to the bulls or the bears.

KAM Advisors has long positions in JPM and WFC

Does Jobs Report Indicate More Slowing Growth?

The jobs report did come in much weaker than expected, so this time around the ADP report actually did foreshadow more to come.  March nonfarm payrolls rose just 88,000 versus expectations for something closer to 190,000.  So that is a big drop.

The unemployment rate declined to 7.6%, but that figure is misleading.  The decline was not due to job growth but rather to a drop in the labor force participation rate.  That rate has hit levels not seen since the 1970s.  If the participation rate had remained constant the unemployment rate would have actually risen to 7.9%.

The disappointing jobs report hit the equities market early, with the Dow opening down some 150 points.  We will see the obligatory bounce during the trading session but how the market closes today will have more impact on trader's psyche heading into next week.

The bond market is acting like the jobs report is indicative of a bigger slowdown in the economy.  The 10-year yield has dropped all the way down to 1.69%, back to levels last touched in December.  I think a lot of folks were caught leaning the wrong way on bonds, as most were positioned for rates to go up.  That could be exacerbating today's action, but I don't feel that these low yields are sustainable even in a 2% growth environment.

Asian markets were mixed overnight.  Hong Kong was lower, while Japan continued to rally on QE news from the BofJ yesterday.  China remained closed for a holiday.

Europe is also lower today.  Reports indicate that the troika may delay its next tranche of aid to Greece.  Elsewhere, French President Hollande's approval rating has sunk to a new low of 27%.

The dollar is lower today and commodities are mixed.  Oil prices are lower near $92.50.  Copper prices are also lower.  But gold prices are higher in a flight to safety move, pushing gold back near the $1565 level.

The volatility index spiked higher after the open.  It is currently up 5% near the 15 level that we have been highlighting.

Trading comment: The recent breakdown in the Russell 2000 small-cap index turned out to be a good leading indicator of broader weakness.  The S&P 500 got down to 1540 this morning, while its 50-day average is closer to 1530.  I think folks will be worried about economic growth slowing after today's jobs report.  Also, FFIV lowered its earnings guidance last night, and that is hitting the tech sector.  So there is likely to be some caution ahead of earnings season as well.  Both of these factors likely increases the chances that the market has more work to do in this nascent correction.  The recent uptrend has been in place for months, and some consolidation is certainly overdue.  So we will look to put new money to work in tranches as opposed to all in one fell swoop.

Japan Ups The US In Quantitative Easing

The markets are mixed this morning in early trade.  The S&P is trading higher, led by materials stocks while the Nasdaq is lagging weighed down by technology issues like AAPL, GOOG, etc.

There hasn't been a whole lot of market moving news this am.  Weekly jobless claims rose more than expected for the week, but some are pointing to seasonal adjustments by the Dept. of Labor as skewing the figures.

Asian markets were mixed overnight.  China and Hong Kong were closed for a holiday.  But the big news was the Bank of Japan stepping up its asset purchase program by almost doubling it.  As a percentage of the country's GDP, Japan's quantitative easing is about 3x as big as the U.S.  The BofJ said it would continue to buy govt bonds, but would also buy REITs and ETFs over the next two years.  So they are really trying to reflate assets in hopes of igniting the wealth effect.

The downside of this action is that it is likely to continue to drive the yen lower, which will make Japan's exports cheaper compared the the U.S.  Global auto companies and manufacturers can't be happy about that.

The other news in Asia is the escalating tensions with N. Korea.  Yesterday the US announced it was moving a missile defense system to Guam as rhetoric heats up that N. Korea has long range missiles and is beefing up its nuclear capabilities.  Fun.

European markets are generally higher this morning.  The ECB met and held rates unchanged at 0.75%.  The Bank of England also held its rates steady at 0.50%.  ECB President Draghi said weak economic conditions seen in Q4 of 2012 have persisted this year so far, but the bank stands ready to act if needed. 

The dollar is slightly higher today while commodities are mostly weak.  Oil prices are lower near $92.70 and gold prices have fallen to $1550.  Silver prices are also lower but copper prices are higher.

The 10-year yield continues to slide, falling to 1.77% today. And the volatility index is higher again to 14.50, nearing the 15 level we have been looking for.

Trading comments: Markets continue to be choppy.  The S&P 500 has alternated between up one day down the next for the last 11 sessions.  I heard that the longest such streak of choppiness on record is 12 days.  So the market is looking for direction.  Yesterday's selloff came on higher volume, indicating some distribution.  Also, the small-cap Russell 2000 has become the first index to break below its 50-day average.  So right now it looks like this recent pullback could have some more room to run its course.  That has been a difficult strategy all year, so it wouldn't surprise me to see dip buyers come in again soon.  For its part, the 50-day average for the S&P 500 is currently around 1530 while the index still trades near 1555.  Food for thought.

KAM Advisors has long positions in AAPL and GOOG

Markets Lower After Disappointing Economic Data

Stocks are lower in early trading after some weaker than expected economic data.  The March
ISM Services index came in at 54.4, which was below expectations and down from last month's level of 56.0.

Additionally, the ADP Employment report showed the addition of 158,000 private business jobs in March.  This figure was well below consensus estimates.  We get the official jobs report on Friday, and it does not always follow the direction of the ADP report.

In early trading, financial stocks are the weakest while defensive utilities are holding up best.  The tech sector is faring 2nd best as stocks like AAPL and FB buck the weakness so far.

Overnight Asian markets were mixed.  China was slightly lower after Beijing officials introduced a 20% capital gains tax on property sellers to curb rapidly rising property prices.  But Japan shot up 3% overnight after BoJ governor suggested the need for bold action and reports that aggressive asset purchases will begin in January 2014.

European markets are weaker today after the Italian Treasury said it expects the country's GDP contraction this year to be worse than last month's forecast by about 1.5%.  That's a big dropoff and isn't going to help the debt crisis among peripheral Europe.  Italy is the biggest debt market in southern Europe so investors have been holding their breath that the wheels don't fall of in that market.

The dollar is lower today but that isn't helping commodities.  Oil prices are down near $95.50 and gold prices have declined near the $1570 level.  Ag prices are higher but copper prices are lower.

The 10-year yield is lower again and has hit 2-month lows at 1.82%.  The decline in yields normally would coincide with concerns about slowing economic growth, but with the Fed doing QE purchases this indicator may be skewed.

The volatility index is higher by 5% so far to the 13.51 level.  I still expect it to get back to around the 15 level if the market continues to chop around, but we shall see.

Trading comment: With slower economic growth, no pickup in Europe, and China trying to curb property price appreciation we might finally be at the point where the stock market is due for a little more of a breather.  The constant stair-step action has been surprisingly resilient.  But prudent investors know that it can't go on indefinitely.  We also have Q2 earnings season around the corner, so the next leg in the market could be dictated by what we hear from CEOs in terms of their outlooks.

KAM Advisors has long positions in AAPL and FB

Good Article on 'Money' Advice

I thought this quick article had some good suggestions for money smart decision-making--

http://finance.yahoo.com/news/five-really-dumb-money-moves-you-ve-got-to-avoid-164637870.html

Stocks Follow European Lead And Rally

Stocks are higher in early trading after a lackluster start to the new quarter yesterday.  In economic news, factory orders rose 3.0% for February which was better than expected.

Healthcare stocks are leading the early action after the Centers for Medicare announced a 2014 rate increase for prescription drug benefits.  Stocks like HUM, UNH, etc. are up more than 5% on the day.

Asian markets were mixed overnight.  Japan reported its monetary base expanded 19.8% vs. last year.  The Reserve Bank of Australia left its key interest rate unchanged at 3.00%.  They also said there may be room for more cuts as inflation remains tame.

Europe's markets rallied nicely this morning on the heels of some manufacturing data that was released.  Overall the eurozone manuf. PMI came in above expectations at 46.8.  Eurozone unemployment was reported at an all-time high of 12.0%.  French PMI was 44.0, Germany 49.0, Italy 44.5, etc.  The notable trend here is that all of the readings are still below the key 50 level that marks the difference between expansion and contraction.

The dollar index is higher today and weighing on commodities.  Gold prices are lower to $1580.  Silver and copper prices are also lower.  Oil prices are down near $96.48 and gasoline is also lower.  Gas prices at the pump here in LA are still above $4 a gallon, but hopefully the recent tick down is gasoline futures will translate into lower prices at the pump.

The 10-year yield is higher today to 1.86%.  And the VIX is down nearly 5% back below the 13 level.

Trading comment: This market continues to frustrate those looking for a better buying opportunity.  Many stocks remain extended on the charts but refuse to pull back.  The same can be said for most of the major indexes.  The S&P 500 is now within striking distance of its all-time highs from 2007.  That could lead to another round of buying or short covering.  The remains due for a correction, but the timing of which remains elusive.  Better to add to stocks that have at least consolidated recently while saving some cash to put to work if we do get a better pullback.

Monday Morning Musings

Back in the saddle after some time off last week for spring break with the kiddos.  Time to shake off the cobwebs and get back in sync with the market.  The S&P 500 closed at new highs at the end of last week as the stairstep pattern continues.

The market started off the new quarter this morning slightly higher, but has since faded into negative territory after some weaker than expected economic data.  The March ISM manuf. index slipped to 51.3 vs. expectations of 54.0.

Economic data was also disappointing in Asia overnight, and led to some declines.  Japan's Tankan index fell to 6 (vs. 8 consensus) and China's manuf PMI came in at 50.9 vs. expectations for 52.0.

Markets across Europe remain closed for the Easter holiday.

The dollar is lower today, but commodities are mixed.  Oil is trading lower near $96 after reports that Exxon had to shit its Pegasus pipeline due to a leak.  Gold prices are firm, and hovering under the $1600 level.  Silver and copper prices are lower.

The 10-year yield was higher briefly but has turned lower and is testing last week's lows near 1.83%.  The volatility index is 10% higher so far near the 14.0 level.

Trading comment: It seems portfolio managers continued to put money to work right into quarter end and that helped boost the S&P 500 to a new closing high.  But today that strength has not carried over, at least so far.  We could see dip buyers surface again before the close.  Often times we see buyers come in on the first day of the new quarter.  Last quarter was one of the best in decades for stocks, so a repeat is unlikely in Q2.  Also, we have not seen much at all in the way of corrections in the market since last winter.  We think there is a good chance we get a deeper pullback sometime this quarter, but of course the timing of such is always the trickiest.  Some of this could come down to where we are in terms of investor sentiment.  I need to do a roundup of all the indicators we track, and will report updates during the week.