Tuesday, September 24, 2013

Will Stocks Bounce After 3-day Slide?

The markets started out lower this morning but have since rallied back into positive territory.  Stocks have been on the decline for the last 3 sessions after making new highs last week.  This year we have seen stocks bounce after short declines, so 3 days might be about all we get on the downside before we see a bounce.

Housing data was positive today with the Case-Shiller 20-city index spiking 12.4% in July.  And the FHFA Housing Price Index rose 1.0%.  But it will be interesting to see how the rise in interest rates effects the Case-Shiller figures when we get August and September numbers.

Also, consumer confidence for September came in at 79.7, which is down from the prior month's reading of 81.8.

Asian markets were lower across the board overnight.  China's SHIBOR rates were on the rise again, with the 2-week rate hitting 4.80%.  The PBOC stepped in to provide liquidity by injecting CNY88 billion into the system.  European markets trade with modest gains today.

The 10-year yield is sliding further, falling below its 50-day moving average to 2.67%.

Commodity prices are weaker today with oil prices sliding to $102.65 and gold prices weaker near $1315.

The volatility index spiked higher yesterday but today is back down below the 14 level to 13.95.  We have said for most of the year that when the VIX is below 15 the markets usually stay in rally mode.

Trading comment: We have been using the pullback in the market the last couple days to put cash to work mostly in equities.  There are also some closed-end bond funds that have been pretty beaten up that we have added to modestly.  But mostly we are looking to add to stocks that have been making new highs recently and are pulling back along with the market.  Big banks seem to have taken a back seat in the leadership arena but select tech, insurance, biotech and industrials offer opportunities.


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