Tuesday, September 17, 2013

Markets Remain In Rally Mode

Stocks are higher again in early trading after closing mixed yesterday.  The Dow was nicely higher yesterday while the Nasdaq was lower due to losses in AAPL.

Investors remain in a buying mood, despite anxiety over tomorrow's FOMC meeting where it is expected that Bernanke will announce a reduction in the Fed's asset purchases by $10-15 billion.  Bernanke seems anxious to get the taper started while the market expects it, despite the fact that inflation continues to run below their target.  Core CPI over the last 12 months is up 1.8%.

In economic news, the September NAHB Housing Index was unchanged at 58.

Asian markets were lower overnight.  Hong Kong's unemployment held steady at 3.3%.  And the minutes from the Reserve Bank of Australia suggested the central bank will continue easing if the incoming data supports it.

Europe is also lower this morning.  Germany's ZEW economic sentiment index rose to 49.6 from 42.0.  And in Germany Chancellor Merkel said that a decision for another aid package to Greece will not be made until after the New Year.

The dollar is flat today and commodities are mixed.  Oil prices are weaker near $105.82.  Gold prices are down a bit to $1309.  But silver and copper prices are higher.

The 10-year yield is down slightly to 2.86%.  It will be interesting to see the bond market's reaction tomorrow to any announced taper and how much of it is already priced in at this point.

As for the volatility index, it continues to trade below the 15 level at 14.39 today, unchanged so far.

Trading comment: Despite being short-term overbought the market has not pulled back much recently.  This seems to be how things have gone this year.  As soon as the market emerges from shallow pullbacks, it rises quickly and doesn't give a lot of time to think about picking your spots.  We put some money back to work recently and continue to look for stocks that are emerging from consolidations and look ready to stage another advance.  Lately we have added to select financials and industrials and dipped our toes in slightly to some beaten up REITs.


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