Monday, August 26, 2013

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


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