Monday Morning Musings

Markets are back in rally mode this morning after Friday's selloff that closed near its lows.  The one saving grace from Friday was that volume levels ran low, which means there wasn't as much conviction behind the selloff.

There was some positive economic news this morning when the Empire Manuf. index came in at 7.84.  That's a pretty big jump from last months reading of -1.4.  It was also well above expectations.  Also, the June NAHB Housing Index rose to 52 from 44, which was also well above estimates.

Of course, the big news this week is the FOMC meeting.  It's big because traders are hoping the Fed chairmen will give more of a glimpse into when they might start "tapering" their asset purchases.  I really don't think he will change his tune that much.  I also don't think they will do much more than tinker with the size of purchases between now and 2014 when Bernanke's term ends.

Asian markets were mixed overnight.  Japan spiked +2.7% higher after reports suggested that the BoJ's REIT purchases will exceed previous targets.  China's markets were lower after Fitch warned that China's credit bubble is 'unprecendented in modern history'.  And the Bank of India left rates unchanged at 7.25%.

Europe's markets are mostly higher today.  Italy reported a trade surplus of 1.91 billion Euros, but this was below expectations.  Germany's Merkel said she would serve a full third term if re-elected in the fall.

Commodities are lower again today.  Oil prices are slightly weak near $98.15 and gold prices are lower to $1383.  Copper and silver prices are lower as well.

The 10-year yield is trying to hold support at it's short-term 20-day moving average around 2.13%.

And the VIX is lower on today's rally, but still holding above that 15 level at 16.77.

Trading comment: Last week's action was pretty constructive, with rallies coming on strong volume and selloffs coming on lighter volume.  The outlook for our thesis of another push higher in stocks into quarter end remains intact.  Bears will probably try to knock the market down this week with the FOMC meeting and all, but if they are unsuccessful we wouldn't be surprised to see more performance chasing by portfolio managers.  More growth stocks appear to be breaking out or nearing breakouts, which is also a good sign for investors.