Was That The Bottom In Gold?

The markets started off lower this morning but have since bounced and are trying to stay in positive territory.  Also, gold was down again this morning breaking below the $1200 level but it also reversed sharply by more than $30 and is now higher near $1215.

I'm sure gold has been under a lot of pressure from portfolio managers whose performance is hurting due to the sharp decline in gold prices this quarter.  But gold is very oversold down here, and it could easily be due for a rally.

In economic news, the June Chicago PMI fell to 51.6 from 58.7 last month.  This weak report helped pressure the market in early trading.  But the Univ. of Mich. final June consumer sentiment survey rose to 84.1 from 82.7 before.  So consumers remain upbeat about the economy.

Asian markets were higher across the board overnight.  Japan spiked 3.5% higher after some positive economic data.  China bounced 1.5% after the PBOC made some calming remarks about the economy.  That helped push the overnight SHIBOR rate down to 4.94%.

The 10-year yield is a little higher near 2.50%.  Fed gov. Lacker made comments that the Fed could trim QE as early as September.  This seems stupid to me, as recently as yesterday the Fed was trying to backpedal on Bernanke's comments that unnerved the markets.  The Fed does not seem to have a cohesive message and that is likely confusing the markets more than anything.

The volatility index is -3% lower to 16.30 today.

Trading comment: The S&P 500 traded down to the 1600 level this morning before bouncing back to 1613.  Yesterday the SPX ran right into resistance at its overhead 50-day near 1619.  This is a logical place to pull back from.  While we still think that the stock market has more of a correction in its future, the question is will the 50-day continue to act as resistance or will the SPX make one more push higher into July before running out of steam.  That question is now knowable in advance but we continue to look for opportunities to get a bit more defensive.  That said, our big picture thesis is that any summer correction will likely prove to be a good buying opportunity.