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