Monday, July 22, 2013

Monday Morning Musings

Back in the saddle after my vacation back on the east coast.  For those who live in the East, my kids and I travelled to Bethany Beach, DE where I vacationed as a kid.  Travelling there from LA is quite a hike, and I feel like I need another vacation from my long day of travel alone.  I also want to give a shout out to Nick for filling in for me with guest posts last week.  Nice job, Nick.

The markets didn't really skip a beat last week, and kept stair-stepping higher in a continued surprising fashion.  Several market strategists I follow are calling for a market high somewhere in this area and a late summer correction.  This has been a tough call, so we shall see.

In economic news, June existing home sales came in below expectations and also below the prior month's levels.  Housing stocks are lower on the news.  Bond yields are also lower, with the 10-year yield down to 2.48%.  Some have speculated that the weak housing numbers could give the Fed pause on its taper talks.

In earnings news, the big report this morning was McDonalds which reported disappointing earnings and the stock is lower.  MCD cited a challenging market caused by economic uncertainty.

Markets in Asia were higher, led by China after the PBOC said it would removed the floor from lending rates.  Europe's markets are trading mixed today.  In Portugal, the PM said the coalition govt would remain in power and honor bailout commitments.  Bond yields fell 51 bps to 6.23%.

The dollar index is lower today and that is helping precious metals rally.  Gold prices have spiked above the $1300 level to $1326.  Silver prices are up 4.4%. 

The volatility index broke below the 13 level on Friday and currently sits near $12.80.  We correctly alerted readers that a break below the 15 level, which occurred on 7/5, was likely to usher in another rally attempt at new highs.

Trading comment: The market is currently overbought at these levels, and is certainly due for a rest.  That has been a tough bet all year, but it seems folks are growing more bullish by the day and rising complacency could usher in a bigger pullback than most are ready for.  Biotechs have been on fire recently, and some big ones are scheduled to report this week.  We also hear from AAPL tomorrow, which should be an interesting report given the company has no new products and foreign markets seem to be slowing down.

KAM Advisors has long positions in AAPL, MCD


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