Wednesday, August 14, 2013

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.


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