Stocks Bounce On Positive GDP Revision

Stocks are higher again in early trading, despite continued tensions in Syria.  Today investors got a positive piece of economic data in the form of a positive revision to Q2 GDP figures.  Initial estimates were for growth of 1.7% but the revised figure shows growth of 2.5%.  Not bad.

Asian markets were mostly higher overnight.  India rebounded 1.7% on a bounce in the rupee.  In Australia, home sales fell -4.7% last month.

Europe's markets are also higher today.  Eurozone retail PMI rose to 50.3 from 49.5.  And Spain's GDP slipped -0.1%, in-line with expectations.

The 10-year yield is roughly flat today near 2.78%.  It was higher earlier but has since eased back to unchanged on the day.

The volatility index is another 2% lower but still trading above the 16 level.  We would lean towards the notion that as long as the VIX stays above 15 it increases the likelihood of another selloff in stocks in the near-term.

Oil prices are showing a bit of weakness and trading down near $109.25 despite Syria.  This is weighing on stocks in the energy sector.  Gold prices are also lower today, trading down to $1405.  It could be that some of the safe haven trade is coming off and profit taking from the recent runup in gold prices.

Trading comment: Trading volumes continue to run very light, but that isn't stopping the market from enjoying a nice bounce in early trading.  It's still early though, so we will have to see if this strength can last into the close.  We still think there is likely another move lower in stocks, but we would look to use upcoming weakness to start to put cash back to work into equities.

Oil Rises Along With Syrian Tensions

Our markets are slightly higher in early trading, bouncing from yesterday's sharp selloff.  Tensions in Syria continue to heat up as does speculation about the type of response we will see from the US.

Asian markets were lower overnight.  Oil prices spiked as high as $112 overnight, and are trading near $110 currently.  India's currency continues to slide and weigh on sentiment in the region.  Since June alone, the rupee has lost more than 20% vs. the dollar.  Ouch.

Europe's markets are mixed today.  German Chancellor Merkel said during a campaign rally that "Greece should have never been allowed into the euro" and that the decision weakened the Stability Pact.

In economic news, pending home sales for July fell -1.3%.  After a string on positive housing data we are likely set for some weaker numbers as higher interest rates have cooled things.  Wells Fargo said refi activity is down nearly 50% from its recent peak.

The 10-year yield is trading at 2.76% as the Treasury readies to auction $35 billion in 5-year notes today.

And the volatility index hit the 17 level yesterday before settling lower.  It is currently down -1% on the day near 16.50.

Trading comment: We have been saying for weeks now that we didn't want to chase the market and wanted to be patient awaiting a better buying opportunity.  Yesterday's selling knocked the S&P 500 below its 50-day average and put it in a weakened technical position.  Corrections never come in straight lines, so we want to look for opportunities to put cash to work in stages.  The SPX is almost 5% off its recent highs.  That is probably a good area to start looking to put your first tranche of cash to work.  Then we will take another step back and see how the action unfolds.

Monday Morning Musings

Markets are higher again in early trading for a  third straight day.  Volume continues to run very light, and will probably remain light on this last week August before the Labor Day weekend.

The one big piece of economic data was the durable goods report for July, which fell more than expected by -7.3%.  But ex-transportation it fell -0.6%.  Nonetheless, it was a weak datapoint and could lead to some reductions in GDP estimates for Q3.

In corp news, Amgen will acquire Onyx Pharma (ONXX) for $125 per share.  This has been speculated for weeks and was already reflected in the stock prices.  But AMGN is trading higher nonetheless.

Asian markets were mixed, but China and Hong Kong finished higher after strong quarterly results from Sinopec and China Construction Bank.

Europe's markets are lower today after Italy fell -2.3% on news that Berlusconi's party has agreed to withdraw from govt should he be expelled from the Senate.

Commodities are mixed and the dollar is little changed.  Oil prices are flat near $106.20 and gold prices are down only a tad to $1395.

The 10-year yield is easing back a little more to 2.80%.  This is not surprising given the weak durable goods report.

As for the VIX, it is still hovering near the 14 level, having surpassed the 16 level last week before reversing lower.

Trading comment: The S&P 500, as well as the mid-cap and small-cap indexes continue their low volume bounce back above the 50-day averages.  This hasn't been a convincing move, but we have to respect the price action nonetheless.  The Nasdaq is actually close to making a new high.  So the correction we envisioned hasn't come to fruition yet, which is not surprising.  We know markets can do anything at any time.  But volume levels are running light, and we might not see the true character of this market until next week.  As such, while we continue to watch individual situations for things like new breakouts (DDD), we want to be patient and keep some cash on hand.

KAM Advisors has long positions in AMGN, DDD

Has Confidence Eroded?

The Nasdaq halted trade for 3 hours yesterday due to a technology glitch.  If it had been a really busy trading day I think there would have been even more outrage.  But on a slow summer trading day, we aren't hearing a lot of stories about investors who got hurt. 

The big question is what would it mean for confidence?  When the markets reopened, they didn't plunge as some feared?  And this morning after folks have had more time to study and digest the issue, markets are higher in the early going.  So maybe this will be a wake-up call for Nasdaq but won't be a bigger issue overall.

In economic news, July new home sales plunged -13.4%.  This was well below estimates and is weighing on the homebuilding sector.

The 10-year yield is lower today and helping to boost beaten down interest rate-sensitive sectors.

Asian markets were mixed overnight.  A research in China said that the country may once again face liquidity issues in the second half of the year.

Europe's markets are also mixed.  Germany's GDP rose 0.7% and Great Britain's GDP was revised higher to 0.7%.  German Finance Minister said the Greek economy may enter expansion next year, but is still likely to need a small new aid package.

Trading comment: The bounce in the market yesterday might have to be asterisked since we don't know what true volume would have looked like.  Today, the S&P 500 is back above its 50-day average but just barely.  This is an important area of resistance.  If the SPX can regain this level convincingly then it would argue for a continuation of the rally.  But if it fails again and cannot retake its 50-day then that would mean we are likely in store for more of a correction.  We are placing a higher probability on the latter, but as we know anything can happen in the market so we are trying to remain patient.  Have a good weekend--

Strong China Data Boosts Stocks

Yesterday was a wild ride in the market.  Stocks were lower in the morning but rallied after the FOMC minutes were digested, but then stocks swooned again into the close.

Overnight, the China HSBC PMI manuf. index jumped to 50.1 from 47.7.  That data will be warmly greeted by investors who have been worried about the slowdown in China.  It is also helping to boost commodities even in the face of a rising dollar today.  Oil prices are higher to $104.35, gold prices up up near $1376, and silver and copper prices are higher as well.

In Europe, the Eurozone manuf. PMI increased to 51.3 from 50.3 and the Services PMI also rose to 51.0 from 49.8.  So both sectors are now above the 50 level that marks the difference between contraction and expansion in these surveys.  Separately, a Bank of England member said the central bank has not ruled out fresh stimulus measures.

In US economic news, the June FHFA Housing Price Index rose 0.7% following a 0.8% increase the prior month.  Also, leading indicators for July increased 0.6% following no change in June.

The 10-year yield continues to be a big focus.  This morning it again touched the 2.90% level and is currently at 2.89%.  Traders have cited these levels as important to watch, but I don't see why they are any more important that the round 3.0% level that could be in the cards. 

But as yields have risen many interest rate-sensitive groups such as REITs and preferreds have sold off far more than seems warranted by the rise in rates.  I think around the 3.0% level in the 10-year there will be some attractive opportunities to add to some of the yield stocks.

As for the VIX, it closed near the 16 level on yesterday's selloff.  Today it is down -7% back below the 15 level to 14.81.  We had been in that 12-15 level trading range for the last 6 weeks.  It will be interesting to see of the 15 level turns from resistance to support.  Watch for that.

Trading comment: Today's bounce came early but there is still a lot of time left in today's session for sellers to emerge.  Also, we need to watch volume levels as they have been very low recently.  Even if today's bounce holds, I think it is just part of the consolidation process.  Markets never move in a straight line.  But it still feels like the market has more work to do in this correction process and we want to be patient awaiting what we think will be a better buying opportunity.

Hurry Up And Wait (FOMC Style)

The markets are mixed in early trading, with the Nasdaq a bit higher and the S&P 500 slightly lower.

The FOMC minutes from the last meeting will be released at 2PM EST today, and it again seems like trading volume will be even lower than normal as traders don't want to place big bets ahead of the news.

But these are just the minutes, not a policy announcement.  I don't think we are going to hear too much of a change in sentiment from the Fed.  They are leaning towards a September 'taper', but the decision remains data dependent.  That means the next job report should be a big one, in terms of market impact.

Bond yields are inching higher as the slowly migrate towards the 3.0% level.  The 10-year yield is near 2.85% this morning.

The volatility index is very high this morning given the slight drop in the market.  The VIX is spiking 8% above the 16 level for the first time in about six weeks.  Maybe traders are buying protection ahead of the FOMC minutes.

In economic news, July existing home sales came in better than expected at 5.39 million units.  That's a 6.5% monthly jump.

In corporate news, Lowe's stocks is higher after beating earnings while Staple's is a big disappointment following the company's earnings miss.

Asia's markets were mixed overnight.  Malaysia GDP came in below expectations at 4.3% and caused them to lower their 2013 growth forecast.  India was also lower last night, falling to an 11-month low.

Also, Japan upgraded the nuclear leak classification to Level 3, which indicates a "serious radiation incident".  I don't know why more people aren't worried about this.  The radiation is leaking into the ocean.  And I just ate sushi last night.  Yikes.

Commodities are mostly lower with oil prices near $104.60 and gold prices weaker around $1367.

Trading comment: Yesterday's bounce wasn't even enough to propel the S&P 500 back above its 50-day moving average.  And the mid-cap and small-cap indexes are sitting right on their 50-day support currently.  So we will await the reaction to the FOMC minutes.  If rates spike higher, we would expect it to be accompanies by weakness in stocks.  In all, it still looks like the market needs to put in more time in this correction phase.  But we still would view a pullback as healthy overall and hopefully will offer one more buying opportunity as we head into Q4 of the year.

A Bounce With Conviction?

The market has been lower for 4 consecutive days.  That's not usually out of the ordinary, but this year has been anything but ordinary.  So today on day 5 we are seeing a bounce.  It is still early, so we need to see if it sticks.  Also, you have to wonder what the volume will be like today and if it will signal any conviction behind the buying or if it is just a low volume bounce.

A handful of retailers reported earnings last night and this morning, with mostly positive reactions in their stocks.  Best Buy (BBY) and URBN are up nicely, while DKS is lower after missing earnings and revenues.

Asian markets were lower across the board overnight led by a -3.2% drop in Indonesia as the country's currency slumped to a 51-month low.  Ouch.  India is also under pressure as its currency slides.  Thailand's economy has slid back into recession for the first time since the financial crisis.

Europe's markets are mostly lower as well.  Norway's GDP rose 0.8%.  And the French PM said he expects the country to reach full employment in ten years.  Quite a forecast.

The dollar is lower but commodities are mixed.  Gold prices are higher near $1375 while oil prices are lower to $106.15.

The 10-year yield is lower by 6 bps today to 2.82%.  Interest rate-sensitive sectors are enjoying a relief rally due to the pause in rising rates.  REITs are higher as are utilities.

The volatility index close above 15 yesterday for the first time since early July.  It is currently -3.6% lower on the day to 14.55.

Trading comment: We thought we might see a bounce right from the 50-day averages of the major indexes, but it looks like an undercut of said levels was in the cards first.  Today we are getting that bounce we had been expecting, but it remains to be seen how high it can carry the indexes and what kind of volume we will see.  The most likely scenario is that the market will bounce in the near-term and then come back down to test the recent lows.  If those lows hold, it will provide a better entry point for stocks.  If they don't hold, then we will continue to hold higher cash levels.  Either way, today is not the day to make any big bets.

Monday Morning Musings

Looks like we are off to a bit of a slow start on this late Summer Monday.  The last two weeks are usually a popular time for vacations on Wall St.  Of course, that is if you don't have kids who are starting school this week.  What ever happened to school not starting until the day after Labor Day? I miss back when.

Volume is light this morning and we are still looking for a bounce in the stock market after the S&P 500 tested it's 50-day average support.  Financials are heavy in the early going after news about an inquiry into JPMorgan's hiring practices in China and a WSJ article about what the Fed taper could mean for the financial sector.

Tech is trading higher today, led by a nice 10-pt bounce in Apple.  I haven't seen any news there, so it could just be more money flowing back to shares of AAPL ahead of the expected new phone launch in September.

Asian markets were mostly lower, although Japan and China were both higher.  But there were sharp selloffs in the likes of Indonesia and Thailand.  China said housing prices rose 7.5%.  And Reuters said the PBOC doesn't expect any big policy changes.

Europe's markets are mostly lower as well.  Germany's Bundesbank will not rule out a rate hike if inflationary pressures emerge.

The 10-year yield is rising again, up to 2.86% today.  This is again weighing on interest rate sensitive sectors - homebuilders, REITs, preferreds, bond funds, etc.

The volatility index is up slightly to 14.61.  Its testing its overhead 50-day average currently near 14.83.

Trading comment: The S&P 500 isn't the only index testing its 50-day average.  The S&P mid-cap 400 and Russell 2000 small-cap have also tested their respective 50-day averages.  So it is within reason to expect to see some sort of rally attempt and bounce in this area.  Traders will be watching volume to see if there is any conviction behind the bounce.  If not, then we would expect to see the markets trade lower again after any bounce and retest the recent lows.  The timing of this scenario differs each time, but what it tells us is that it is still prudent to be patient at this juncture and let things play out.

KAM Advisors has long positions in JPM

S&P 500 Tests 50-day Support

The market is slightly higher in early trading.  It's a summer Friday when vacation season starts to heat up on Wall St, so volume is likely to be lighter than usual.  The S&P 500 came down and touched its 50-day average this morning and is now attempting a weak bounce.

The other indexes are also higher, and actually leading the S&P 500.  Bond yields are also slightly higher today to 2.78%.  Yesterday they broke above 2.80% but closed near their lows of the day around 2.75%.

Housing starts hit 896,000 in July, which was higher than an upwardly revised rate of 846,000 in June.  And building permits rose to 943,000 from the prior month's rate of 918,000.  Homebuilding stocks are rallying on the data.

Separately, the Univ. of Mich. consumer sentiment report fell to 80.0 in July from 85.1 the prior month.

Asian markets were lower across the board overnight, led lower by a -4.0% drop in India.  Ouch.  Hong Kong reported GDP growth of 0.8% for the quarter.

Europe's markets are mixed.  Eurozone CPI fell -0.5% month over month.

Commodities are mostly higher.  Oil prices are up again near $107.85 amid continued tensions in Egypt.  Gold prices are also higher to $1368.  Silver and copper prices are also higher again today.

The volatility index spiked to its overhead 50-day average yesterday.  Today it is moving lower from that resistance level, down -6.7% to 13.75.

Trading comment: Markets rarely go down in a straight line.  So far the S&P has pulled back 3% from its highs earlier this month.  We would expect a little more of a pullback on a percentage basis, but these things are never precise.  That said, it would be normal to expect a bounce from here first.  Often we see a somewhat weak bounce from key support levels (50-day average), and if the bulls are unable to gain any traction the market comes back down and tests the recent lows.  It is only at the time of that test that we can tell if the market looks like its going to probe lower levels.  So again, we want to be patient.  We put maybe 1/3 of our cash to work at current levels, and then we wait and see if we get a chance to put more to work at lower levels.

Bond Yield Breakout

The markets are sharply lower this morning on mixed economic data and rising bond yields.  There were also a couple of disappointing earnings reports last night from Cisco and Wal-Mart.  CSCO lowered its guidance for next quarter and said it will reduce its workforce by 5%.  WMT also reduced guidance for full-year 2014.

Economic data was mixed.  The August NAHB Housing index rose to 59 from 56 last month.  And jobless claims fell for the week.  But the Empire Manuf. index fell to 8.2 from 9.46 last month, and the Philly Fed survey fell to 9.3 from 19.8.  Industrial production was flat in July vs. expectations for 0.4%.

The net long-term TIC flows report showed that foreign buyers were once again net sellers of our debt to the tune of roughly -$85 billion.  This could be exacerbating the selling in bonds, which is driving yields on the 10-year T-note as high as 2.80%.  That marks a breakout from the recent highs near 2.73% and takes the 10-year yield to its highest levels since Aug. 2011. 

Asian markets were mostly lower overnight.  Hong Kong reopened and finished unchanged.  Singapore retail sales fell -4.0%.

Europe's markets are all lower today.  Trading is light around Europe as many participants are out for the Assumption Day holiday.  Great Britain's retail sales rose 1.1% for the month.  On a year-over-year basis it was the best reading since January 2011.

The dollar is roughly flat today.  Oil prices are a touch higher to $107, which is getting high once again.  And gold prices are a bit weaker near $1325.

The volatility index is spiking 10% to 14.40.  It briefly touched its overhead 50-day average closer to the 15 level.  When the VIX was down near 12 recently, we said we thought that would mark the lows and a move towards 15 was likely.  We should have eaten our own cooking, as the VXX has moved up roughly 8% over that time frame.

Trading comment: We have said recently that we wanted to be patient with cash balances as it was likely that the market had more consolidating to do.  We wanted to see if the 1684 level in the S&P 500 would hold or not.  Today that level has been broken decisively.  The SPX touched 1659 this morning, which is within 3 points of its 50-day average. A bounce from the 50-day is a fairly normal occurrence.  As for the other indexes, the Nasdaq is still a little ways above its 50-day while the Dow has already broken below its 50-day support.  So its a bit of a mixed bag by looking at the 3 major indexes.  From here we will be monitoring leading growth stocks.  They are in the midst of corrections also, and when they start to firm up and break out again will be the best sign that the market has regained its footing.

Dawn Of A New Day In Europe?

Markets are trading lower in early trading.  Yesterday the markets started out lower as well but dip buyers surfaced and the markets turned and closed positive on the day.  That has kind of been the pattern lately, so we will have to see if it occurs today as well.

The big news out of Europe today was that the Eurozone showed positive GDP growth for the first time in a year, rising 0.3%.  Germany GDP rose 0.7% and French GDP rose 0.5%.  This has many strategists contemplating if Europe is ripe for investment as it emerges from recession.  Our take is it is probably still early to expect strong growth there as the debt issues and lingering austerity measures will likely keep a lid on growth.

In Asia, a typhoon in Hong Kong closed markets there and probably weighed on sentiment in the region a bit.  Japan fell -1.3% and China was slightly lower as well.

Here in the US, the only economic data was the PPI report for July, which showed prices unchanged.  The lack of any inflation indications is a bit odd for an economy that is supposedly gaining momentum.  This is another confusing datapoint in that it lends itself to the notion that the Fed could hold off on any taper in September.  So there are datapoints on both sides of the argument which further clouds the picture.

So far today Treasuries are flat and the 10-year is steady at 2.70%.  The volatility index is up 3% to 12.70.

Oil prices are a touch lower to $106.18 and gold prices are higher near $1331.

Trading comment: The S&P 500 has been in a narrow trading range for the month of August so far.  Often a breakout of a narrow trading range reveals the next direction of the market.  So far the lower band of said trading range has been in the 1682-1684 area.  So we would be watching a break of the 1682 level as an indicator that maybe the market wants to probe lower levels.  But as we have seen the market usually finds support pretty quickly.  On the flip side, if the SPX can take out 1700 in convincing fashion, then maybe the recent consolidation is over and new highs are in the cards.  While we often refer to the S&P 500 as our market gauge, our internal focus is really on the individual stocks we own.  There, most continue to act well and growth leaders are not showing the kind of breakdowns that usually precede a larger market correction.

Strong Retail Sales Spark Taper Talk

The market is lower in early trading, but once again the selloff appears mild by historical standards.  Yesterday the market dipped also but closed down only slightly on the day.  Dip buyers continue to lurk, and as such those looking for a correction continue to be frustrated.

The big piece of economic data in the headlines this morning was the July retail sales report.  Retail sales rose 0.2% after rising an upwardly revised 0.6% in June.  Ex-autos, retail sales rose a strong 0.5% in July.  Given the weak employment report a couple of weeks ago, many economists were not expected strong retail sales figures.

The strong retail sales report sparked waves of selling in bond, sending prices lower and yields higher.  The yield on the 10-year Note spiked 10 basis points to 2.71% currently.  That has all the interest rate-sensitive sectors lower, including REITs, utilities, preferreds, and bond funds.  For reference, the recent high in the 10-year is 2.73%, touched on Aug. 2.

Bond traders believe the stronger economic data is enough to increase the likelihood of the Fed cutting back on its asset purchases as early as September.  A lot will probably be riding on the September jobs report.  But the Fed doesn't want to surprise the market, so if it appears that a September tapering is already being priced into markets that might make it easier for the Fed to go ahead and get the ball rolling on that front.

Asian markets were higher across the board.  An advisor to Japan's PM suggested delaying the implementation of the sales tax increase until late 2014.

Europe's markets are also mostly higher.  Eurozone industrial production increased 0.7% last month.  And Spain's Treasury chief said the country plans to reduce the pace of its debt sales by 30% starting in September.

The dollar is up today and most commodities are weaker.  Oil prices are down slightly to $105.60 and gold prices are lower near $1328.

The volatility index is up about 3% currently near the 13.0 level as the stock market continues to languish in the red.

Trading comment: Yesterday we mentioned the S&P 500 and its overhead 20-day average acting as resistance.  So far today is day 3 of the senior index trading below this short-term moving average.  Many traders are also watching this 1684-1687 level for support.  To us, the market still looks like it is in some need of further consolidation with sideways choppiness a likely outcome.  Some former leading groups like biotechs seem to be undergoing distribution while recent laggards like materials are starting to bounce.  We continue to put a little bit of cash to work on dips but feel that patience will likely yield a better buying opportunity.

Monday Morning Musings

Markets are mixed this morning with the S&P 500 slightly negative while the Nasdaq is in positive territory.

There isn't much in the way of market moving news this morning.  Most big companies have already reported earnings, although some smaller names will still trickle in this week.  There also are no economic reports to speak of today.

Apple is trading higher by 2.5% after the International Trade Commission issued an import and sale ban on some Samsung products due to infringement on some AAPL patents.

Asian markets were mostly higher overnight.  Japan's 2Q GDP rose 0.6% vs. 0.9% in the previous quarter.  The results were disappointing, as industrial production declined -3.1%.  Elsewhere Singapore GDP rose 3.8%.

Europe's markets are modestly lower as they near their close.  Swiss retail sales rose 2.3%.

The dollar is higher today but not hurting precious metals.  Gold is nicely higher near $1340 and silver is even higher on a percentage basis.  Oil prices are a bit weaker to $105.40.

The 10-year yield is drifting lower near 2.57%.  And the volatility index is down -4% so far back to the 13.25 level.  Last week it nearly touched the 14 level before running into resistance.

Trading comment: The market appears poised for more consolidation in the near-term.  The S&P 500 is trading below its 20-day moving average, which we haven't seen for awhile.  But as has been the case all year, this market doesn't go down easily.  There aren't really any downside catalysts in the headlines today, but there aren't really any upside ones either.  We are still anticipating more sideways trading as the market again works off its recent overbought condition.  But in this benign market, pullbacks are likely good buying opportunities.

KAM Advisors has long positions in AAPL

Feels Like A Slow Summer Friday

The markets are lower in early trading, but there isn't much in the way of market moving news.  The selling feels more like profit taking ahead of a summer weekend before traders head out to the Hamptons.  We don't hear much about this anymore, do we?

But the markets have had a nice run off their June lows, so some profit taking and consolidation here would be healthy - as we have alluded to in recent missives.

There really is no market moving news in the way of economic data.  There were a few earnings reports out.  The big one was Priceline, whose stock is $50 after reporting a strong quarter.  But it isn't helping anything other than PCLN stock itself.

Asian markets were mostly higher on positive economic data out of China.  Industrial production rose 9.7%, retail sales rose 13.2%, and fixed asset investment jumped 20.1%.  This is helping boost metals and materials stocks that are sensitive to China data.  Separately, the Reserve Bank of Australia lowered its GDP forecast for 2013 by 25 bps to 2.25%.  It expects to reach 3.5% growth by 2015.

Europe's markets trade mixed heading into their closes.  Italy's PM warned that the lack of a rebound in jobs growth poses the biggest risk to the economy.

Commodities are mixed.  Oil prices are up a bit near $105, while gold prices are slightly weaker at $1309.  Silver and copper prices are higher.

The 10-year yield is roughly flat around the 2.59% level.  And the volatility index is up 7% on the selloff in the stock market, reaching the 13.65 level.

Trading comment: We have been saying the market likely needs a rest and should see some consolidation.  That appears to be in the works going by this morning's pullback.  Lately, the markets have tended to bounce midday and recoup some of their early losses.  So it will be interesting to see if we get that usual bounce or if stocks close on their lows for the end of the week.  Either way, we are remaining patient and holding above average cash awaiting a better buying opportunity in stocks.  Have a great weekend--

Is Japan Losing Momentum?

The market was higher right at the open, but it quickly faded and the S&P 500 is currently flirting with the staying in positive territory.  One reason cited for the selling was a sharp rise in the Yen.  Japan funds are selling off on the yen strength and more traders are keying off Japan.

Overnight, the Bank of Japan left monetary policy unchanged.  It also kept its economic assessment unchanged following seven consecutive upgrades.  The Nikkei has been very sensitive to rises in the yen, and the recent strength in the yen seems to have taken the wind out of the sails of Japanese equities to the extent that the technical picture has now taken on a bearish tone.  Since Japan has been a leader, one has to wonder if continued underperformance in Japan will have a spillover effect?

In China, trade data improved with exports rising 5.1% and imports rising 10.9%, both above forecasts.  And in Australia unemployment held steady at 5.7%.

Europe's markets are mostly higher after the ECB commented on the current state of affairs saying that recent economic data serve as tentative signal of stabilization and modest improvement from low levels.

Other than that there isn't much in the way of market moving data in the U.S. 

The dollar is lower and that is helping most commodities.  Gold prices are back above $1300, and copper and silver prices are up quite a bit.  Oil prices are bucking the trend and trading lower near $102.50.

The 10-year yield is easing back a bit more near 2.58%.  Fears of an imminent taper seem to be lessening.

And the volatility index is hovering near the 13 level after a big spike higher yesterday morning but then reversing as the day wore on.

Trading comment: The stock market experienced a third consecutive down day yesterday, so a short-term bounce wouldn't be surprising.  That is how it looked at the open, but traders cited a spike in the yen as sparking some selling.  Some of it also could have been technical in nature as the S&P 500 bumped its head right at the 1700 level.  Big round numbers sometimes tend to have a psychological effect.  But given the run the stock market has enjoyed in recent weeks some further consolidation would not only be welcome but healthy.  So we went to be patient.

A Rare Third Down Day

Markets are lower in early trading.  Yesterday the markets recouped some of their early losses but still closed lower on the session.  A down day today would mark the third consecutive loss for the S&P 500.  While that doesn't seem like much, if you look at a chart of 2013 you'll see that three down days has been very rare. 

Earnings season will start to slow down, but there was still a large wave of companies reporting last night and this morning.  So far I am seeing more negative reactions than positive ones.

Stocks rising on earnings: EOG, TWX, AOL, WCG

Stocks falling on earnings: DIS, RL, SBGI, Z, XEC, NICE, LQDT, STE, CLH, CHRW

Asian markets were lower overnight.  Japan plunged -4.0% on a stronger yen.  New Zealand's unemployment rate rose to 6.4% from 6.2%.  Separately, Japan's PM asked the agency responsible to stop the leaking from the Fukushima nuclear plant.  The govt said about 300 tons of contaminated water gets into the ocean on a daily basis.  Doesn't this worry anyone else??  I might have to cut out that Japanese mackerel at sushi.

Europe's markets are mixed.  Germany's industrial production rose 2.4%.  And Britain gave guidance on monetary policy for the first time and said rates will remain low until unemployment falls to 7.0% (it is currently 7.8%).  The BoE also raised 2013 GDP guidance forecast to 1.5%.

The dollar is lower today and commodities are mixed.  Oil and gold are both up fractionally to $105.40 and $1283, respectively.  Copper prices are lower while ag prices are bouncing. 

The 10-year yield is easing back to 2.61%.  There has been more chatter about a September taper recently, but the 10-yr yield has yet to breakout above that 2.75% range.

The volatility index is on the rise again, up 8% to 13.75.  It is up over 15% in the last 2 days since we highlighted the 12 level as a potential bottoming area.

Trading comment: The market is up a lot ytd and has not had a 10% pullback all year.  That doesn't mean we need to have one at this juncture, but a correction here would be healthy for more gains down the road.  The S&P is currently lower for a 3rd day.  I would not be surprised to see dip buyers step in and help the market bounce.  Some technicians are watching the SPX 1684 level for near-term support.  We touched that level this morning.  A likely pattern that could emerge would be a low volume bounce from here for a few days but then a deeper correction as we get into August.  We think investors can be patient in the near-term.

KAM Advisors has long positions in EOG, DIS

Trade Deficit Narrows, Will Boost GDP Estimates

The markets are lower in early trading.  The Dow is down 100 points, but it's still early in the day.  As we have seen repeatedly every time the market is lower in the morning, dip buyers surface and the market recoups most of its decline by the close.  We shall see if that pattern holds true again today.

The trade deficit for June narrowed to $34.2 billion.  This is the smallest deficit since October 2009.  And the big downward surprise vs. estimates means that 2Q GDP estimates will surely be revised higher, somewhere above 2.0%.

There are a few companies that reported earnings this morning and are seeing their stocks trade higher, including CTSH, FOSL, and KORS.  On the downside are CVS and AEO, to name a couple.

Asian markets were mixed overnight.  The Reserve Bank of Australia cut its key interest rate to 2.50% from 2.75%.  In China, the Asia Development Bank said GDP over the next 2 years could fall somewhere in the 7.0% range, and it will likely lower its current 7.7% forecasts.

Europe's markets are little changed.  Britain's Halifax house price index rose 0.9%.  And Italy reported a -0.2% contraction in GDP.

Commodities are mostly lower.  Gold prices are sagging to $1286.  Oil prices are also lower near $105.40.  Copper prices are bucking the trend and trading higher.

The yield on the 1-yr T-note is a bit higher to 2.65%.

Yesterday we said the VIX was likely to find a bottom somewhere near 12.  It closed a bit below that level, but today is spiking 8% to 12.75.

Trading comment: We will likely be patient today to see if dip buyers emerge again or if the market will close near its lows for once.  A pullback from current levels would be healthy, and should not be feared.  We continue to look for spots to add to stocks that recently reported strong earnings but have pulled back since.  We recently had a large wave of bonds called providing fresh cash to portfolios.  At the margin, even good dividend paying stocks will likely outperform bonds for the next few years, so we are looking for spots to continue to tweak our asset allocations in favor of equities.

KAM Advisors has long positions in CTSH

Monday Morning Musings

The market is mixed in early trading.  It was a bit lower after the open, but the market really hasn't gone down much at all lately.  Buyers seem to be quick to buy every dip.  So when the market was lower this morning selling dried up quickly and several of the major indexes are back in positive territory.

In economic news, the July ISM Services index rose to 56.0 from 52.2 last month.

There were also good Services PMI readings from overseas markets as well.  China's HSBC Services PMI remained unchanged at 51.3.  That was viewed as positive as many feared it might show more of a slowdown.

Eurozone services PMI rose to 49.8 from 49.6.  Great Britain's services PMI jumped to 60.2, its highest reading since 1998.  Pretty surprising.  Maybe QE is starting to work there.  Separately Greece's finance minister said the country's funding obligations are fully covered until August 2014.

The dollar index is little changed so far.  Oil prices are slightly lower near $.  Gold prices have dropped below the $1300 level to $1298.  Silver and copper prices are lower as well.

The 10-year yield is higher to 2.65% after the big reversal lower on Friday following the weaker than expected jobs report.

The volatility index is barely above the 12 level.  That's a pretty low level, and one that has marked the lower bound of the VIX trading range recently.  I think that the 12 level likely holds and we see a bounce in the short-term in the VIX.  Of course, this would mostly likely be accompanied by more of a pullback in equities than we have seen of late.

Trading comment: Investor sentiment is growing more bullish, but is not yet at extreme levels.  The indicators we monitor have been on the rise since bottoming in June, but bullish levels are still not flashing the same levels of complacency we saw back in May.  That means that I think we could continue to see this sort of stair-step higher action in the market until folks become overly complacent again, which could leave the market more vulnerable to a bigger correction.

Jobs Report Quells Taper Talk

Maybe the Fed was on to something when it made those slightly dovish comments in its recent statement.  While some folks thought yesterday's strong ISM data raised the specter for a September taper, today's weaker than expected jobs report likely quells those fears.

Nonfarm payrolls rose 162,000 in July, well below estimates for 184,000 jobs.  Private payrolls also came in below expectations.  The unemployment rate ticked down to 7.4%.  But the lighter than expected jobs report probably means the Fed isn't in a huge rush to scale back its asset purchases.

In other economic news, personal incomes rose 0.3% while personal spending rose 0.5%.  Those higher spending figures hopefully bode well for stronger GDP figures in the second half of the year.

Asian markets were mostly higher overnight.  Japan spiked 3.3% while India registered its 8th straight loss.  Indonesia's GDP rose 5.8% yr/yr, but that was below expectations.

Europe's markets have moved lower after the weaker than expected US jobs report.

Stocks rising on earnings: MELI, LNKD, AIG, EAT, SEE, PSA

Stocks falling on earnings: ETN, CVX, IT, CHD, SIRO

The dollar index is lower today and commodities are mixed.  Oil prices are down near $106.75.  Gold prices are up a bit to $1315, but probably should be higher.  Silver and copper prices are also higher.

The 10-year yield has faded back to 2.61% after closing at 2.72% yesterday.  And the VIX is down another 4% to 12.35 so far.

Trading comment: I think many people were geared up for a stronger jobs report today.  So stocks are being sold and bonds are being bought, at least at the margin.  Stocks had a big day yesterday, so today's mild pullback is normal.  But if fears about the Fed tapering in September are diminishing, that should embolden the bulls to come back to stocks next week .  Interest rate sensitive sectors are mixed so far today, with REITs bucking the overall weakness but utilities lower.  Rest up.

New Month, New Highs

The markets are ripping in early trading.  Of course, yesterday the markets were higher in early trading but completely faded after the FOMC minutes were released and closed flat on the day.  We shall see if sellers emerge again today.

The early strength comes on the heels of strong overseas trading, where the FOMC statement was perceived as slightly more dovish.  Also, stronger economic data continued in Asia, Europe, and here in the US.

Earnings reports generally continue to garner positive reactions as well.  Here are some stocks that reported last night and this morning:

Stocks rising on earnings: OCN, WFM, ALL, CHK, MET, YELP, VMC, SU, ITG, SNE, CTRX

Stocks falling on earnings: CLX, HCA, DTV, XOM, K

In economic news, the July ISM Index rose to 55.4 from 50.9 last month.  That's a pretty strong rise and increases the odds for a September Fed taper.  Bond yields are trading higher on the news, with the 10-year yield rising to 2.68% today.  Yesterday it hit 2.70% before reversing into the close.

Asian markets were higher overnight, led by a 2.5% gain in Japan.  China rose 1.8% after its manuf PMI rose to 50.3 vs. expectations of 49.9.  Retail sales in Hong Kong rose 14.7%.

Europe's markets are also higher.  The ECB held rates steady at 0.50%.  Also, Eurozone manuf PMI ticked up to 50.3 from 50.1, with several peripheral countries showing improvement.

Commodities are mostly higher also.  Oil is higher near $107.75, gold prices are firmer around $1315, and copper prices are higher as well.

The volatility index is down 4% today to 12.90.  Yesterday morning the VIX wasn't lower despite the market trading higher, and we cited it as a yellow flag.  So the VIX trading lower this morning is a good sign.

Trading comment: We talked about the likelihood of the recent sideways consolidation being resolved with another upside breakout.  The first attempt was yesterday but today the nail is being put in the coffin with the SPX hitting new highs.  Ditto the other indexes as well.  Folks looking for a good buying opportunity to put more money to work in stocks have continued to be disappointed.  In this market, you really have to pick your spots and the opportunities have come easier in individual situations as opposed to waiting for the 'big drop' in the market.

KAM Advisors has long positions in OCN, MET, and CLX