Looking For A Bounce

Markets are higher in early trading, which isn't surprising.  Over the last 4 days, the S&P 500 has pulled back a sharp -5.5%.  That's not as bad as what occurred in China, but severe nonetheless.  So this morning investors are looking for bargains and putting money back to work.

There was also some positive economic data out today.  First, May durable goods rose by a better than expected 3.6%.  Consumer confidence also came in above expectations at 81.4 for June from 76.2 last month.

Housing data was also strong.  May new home sales hit a rate of 476,000, up from last month.  And the April Case-Schiller home price index rose a strong 12.1%.  The CEO of Lennar also made comments about the strength and durability of the housing market.

Asian markets were mostly lower overnight.  China was down sharply again during trading, but rallied off its lows to finish only marginally lower.  The PBOC still did not act and said that conditions are seasonal.  Also, the overnight SHIBOR rate in China eased back 75 basis points to 5.74%.

The dollar index is up again for a 5th straight day.  Commodities are mostly lower.  Oil prices are down a bit to $94.92 and gold prices are slightly weaker near $1273.  Copper prices are higher today.

The 10-year yield reversed lower yesterday, but this morning it is higher to 2.58%.  I heard that the percentage rise in interest rates recently was the fastest in over 50 years.  Ouch.

The volatility index neared 22 yesterday morning before closing in the lower half of the day's range.  Today it is down another -8.5% to 18.40. 

Trading comment: After a 5-day global selloff investors can expect markets to bounce.  We could also see some additional strength from end of quarter window dressing.  So far the S&P 500 still hasn't surpassed yesterday's highs of 1588.  But it could easily do so.  I wouldn't be surprised to see the 1600 level come into play at some point.  But the now overhead 50-day average hovers near 1618 and I doubt we are going to power over those levels on the first try.  So somewhere in the 1600-1615 zone is a target area where we would look to lighten up or get more defensive for a potential retest of the recent lows (at some point).