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.