Global Turmoil On The Rise

Markets are mixed in early trading amid headlines pointing to escalating global turmoil.  The Egypt situation is quickly coming to a head.  Oil prices have topped $100 for the firs time in many months as worries grow that the political unrest in Egypt could affect the Suez Canal which would affect oil shipments from the Mideast.

Europe's markets are also lower across the board after a flare up in Portugal.  4 key govt officials have resigned or are expected to.  The country's benchmark 10-year yield spiked 126 basis points to 7.72%.  And Portugal's stock market is lower by more than 5% today.

We also have the continued concerns in China, where the services PMI data last night showed a further slowdown in economic activity.  India's PMI also fell to a 2-year low of 51.7.

The odd thing is that our stock markets aren't down more.  As of this post, the Dow is solidly in positive territory.  Optimists would probably point out that this is a positive sign that our markets have begun to decouple somewhat from Europe.  Others might say that our markets remain a bit complacent in the face of rising global tensions and slowing economic activity (Asia).

Our services PMI also fell to 52.5 this morning from 53.7 in May.  But the ADP employment report showed the private sector added 188k jobs in June, which was above expectations.  This report doesn't always correlate that well to Friday's govt payrolls report, so we will have to wait to see how that comes in.

The 10-year yield is flat near the 2.47% level.  And the volatility index touched the 16 level but bounced to 17 today before falling back closer to 16.50 currently.

Trading comment: The S&P 500 is right in the middle of an important range.  Yesterday it again failed to get above its 50-day average near 1624.  And recent support has come in around the 1600 level.  Right now the SPX is smack in the middle of those two hovering near 1612.  So it looks like if the SPX can get back above the overhead 50-day that would embolden the bulls to get aggressive again.  But if we can't hold that 1600 support level, then a more defensive posture remains in order.  I don't think its necessary to make big bets in advance until we see how this plays out.