Monday Morning Musings

Stocks in the US were higher after the open but so far are struggling to stay positive in early trading.  This isn't all that surprising after Friday's outsized rally, which was on the back of Thursday's big reversal.  The S&P has quickly bounced from testing the 1600 level to nearing 1650 this morning.

On a positive note, Standard & Poor's has raised the US debt rating outlook to Stable from Negative, saying that some of the downside risks have receded.  Bond yields are slightly higher despite the news, with the 10-year yield trading at 2.20%.

A couple consumer staples stocks that are higher today are McDonald's (MCD) after reporting solid global same-store sales and B&G Foods (BGS) which announced the acquisition of the company that makes Pirate's Booty (kids reference).

The St. Louis Fed President made comments today that the still low rate of inflation could justify the Fed's aggressive monetary policy stance. 

Asian markets were mostly higher overnight, led by a sharp snapback rally in Japan (+4.9%).  Consumer confidence in Japan hit its highest level since 2007.  China was closed for a holiday, but the Chinese ETFs are lower today after several economic datapoints showed slower growth in China.

The dollar is higher today, and commodities are mixed.  Gold prices are slightly higher while oil prices are a bit lower near $95.50.  Gold is back below the $1400 level ($1383).

The volatility index is sitting just above that 15.0 level that we have been watching as a barometer for investor sentiment.  If it can get back below the 15 level we would not be surprised to see the market rally back to recent highs.  But a move higher in the VIX could mean more consolidation is needed first.

Trading comment: We used the weakness last week to add to stocks.  Our recent worry that investor sentiment would become too complacent seems not to have happened as some of the investor surveys we follow show that bearish sentiment quickly spiked higher last week.  Some of our indicators are showing the highest levels of bearishness so far this year.  High bearish sentiment is okay at this juncture because it keeps the wall of worry high and as the old saying goes "bull markets love to scale the wall of worry".

KAM Advisors has long positions in BGS and MCD