Thursday, August 01, 2013

New Month, New Highs

The markets are ripping in early trading.  Of course, yesterday the markets were higher in early trading but completely faded after the FOMC minutes were released and closed flat on the day.  We shall see if sellers emerge again today.

The early strength comes on the heels of strong overseas trading, where the FOMC statement was perceived as slightly more dovish.  Also, stronger economic data continued in Asia, Europe, and here in the US.

Earnings reports generally continue to garner positive reactions as well.  Here are some stocks that reported last night and this morning:

Stocks rising on earnings: OCN, WFM, ALL, CHK, MET, YELP, VMC, SU, ITG, SNE, CTRX

Stocks falling on earnings: CLX, HCA, DTV, XOM, K

In economic news, the July ISM Index rose to 55.4 from 50.9 last month.  That's a pretty strong rise and increases the odds for a September Fed taper.  Bond yields are trading higher on the news, with the 10-year yield rising to 2.68% today.  Yesterday it hit 2.70% before reversing into the close.

Asian markets were higher overnight, led by a 2.5% gain in Japan.  China rose 1.8% after its manuf PMI rose to 50.3 vs. expectations of 49.9.  Retail sales in Hong Kong rose 14.7%.

Europe's markets are also higher.  The ECB held rates steady at 0.50%.  Also, Eurozone manuf PMI ticked up to 50.3 from 50.1, with several peripheral countries showing improvement.

Commodities are mostly higher also.  Oil is higher near $107.75, gold prices are firmer around $1315, and copper prices are higher as well.

The volatility index is down 4% today to 12.90.  Yesterday morning the VIX wasn't lower despite the market trading higher, and we cited it as a yellow flag.  So the VIX trading lower this morning is a good sign.

Trading comment: We talked about the likelihood of the recent sideways consolidation being resolved with another upside breakout.  The first attempt was yesterday but today the nail is being put in the coffin with the SPX hitting new highs.  Ditto the other indexes as well.  Folks looking for a good buying opportunity to put more money to work in stocks have continued to be disappointed.  In this market, you really have to pick your spots and the opportunities have come easier in individual situations as opposed to waiting for the 'big drop' in the market.

KAM Advisors has long positions in OCN, MET, and CLX


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