Monday, July 08, 2013

Monday Morning Musings

There isn't much in the way of market moving news this morning, but investors have returned from the July 4th weekend in a buying mood.  The Dow is up over 100 points in early trading.

Bond yields saw a big spike higher on Friday after the better than expected jobs report.  Today the 10-year yield is easing back 5 basis points so far to 2.66%.

Asian markets were down across the board overnight.  China fell -2.4% despite the overnight SHIBOR rate declining further to 3.25%.  Citigroup became the latest firm to lower its growth forecast for China in 2013 to 7.4% from 7.7%.

Europe's markets are higher after the EU-IMF panel issued a statement saying that Greece has made important progress but remains behind in some areas.  This assessment sounds less bearish than the prevailing sentiment in recent weeks.

The dollar is lower today and commodities are mostly higher.  Oil prices are down a bit, but still at high overall levels near $102.75.  Gold prices are higher to $1233.  Silver and copper prices are higher as well.

Despite the strong gains in the market in early trading, traders seem worried about downside protection as the volatility index is slightly higher on the day.  It broke below the 15 level on Friday and today is back above that level at 15.11 so far.

Trading comment: This morning's early buying is pushing the S&P 500 convincingly above its 50-day average.  This could serve to further embolden bulls as we head into earnings season.  The next area of resistance to watch would be the SPX 1654 level that marked the highs in June.  From there we would be looking at the yearly highs of 1687 reached back in May.  Although we thought the market could spend more time in correction mode, the recent uptick in bearish sentiment may have helped the market bottom quicker than normal, which is basically the pattern we have seen all year.  It is rare to see the market continue to rally to new highs through the summer, but that doesn't mean its impossible.  One of our key investment tenets to remember is 'Expect the unexpected in the market'.


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