Monday, August 19, 2013

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


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