Tuesday, April 16, 2013

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


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