Guessing About A Retest

The markets are nicely higher again this morning.  Of course, there is still a lot of time left in today's trading session.  I actually prefer a market that opens weak and strengthens into the day.  A market that opens higher leaves a lot of time for sellers to surface and pressure a weak close.

This morning's bounce comes despite a GDP report that wasn't very strong.  The third and final estimate of Q1 GDP showed the economy grew just 1.8%, worse than previous estimates of 2.4%.  The Fed has GDP growing as much as 3.25% in their forecasts, which would be quite a pickup from current levels.

Asian markets were mostly higher overnight, led by peripheral markets.  Japan was down 1% and China was 0.4% lower despite its overnight SHIBOR rate dropping another 44 basis points to 7.20%. That rate is still about the twice as high as the long-run average.

Europe's markets closed higher.  ECB President Draghi said the ECB stands ready to act again if needed.

The dollar is higher for a 6th straight day, and that is weighing on commodities.  Gold is falling further to $1235.  Oil prices are lower near $94.40.  Silver and copper prices are lower as well.

The 10-year yield fell back near 2.50% near the open but has since risen back to the 2.55% level, down 3 basis points from yesterday.

The volatility index is lower again today, down -3.5% to 17.80.

Trading comment: This is day 2 of the bounce from the SPX 1560 level that we touched Monday morning.  But the bounce is coming on somewhat lighter volume than the selloff that preceded it.  Additionally, the index remains below its 50-day moving average.  So a more defensive posture is warranted until the market can prove itself.  More often than not trading lows in the market are retested at some point.  That means the SPX is likely to trade back down towards that 1560 level again.  I would be surprised if the S&P 500 broke back above its overhead 50-day average on the first try.  More likely, those levels will act as resistance and we will have to endure the retest scenario I just outlined.  Patience.