Tuesday, November 19, 2013

A Pause In The Action

Markets opened in fairly lackluster action again today.  Yesterday the markets moved higher in early trading but reversed lower into the close.  Those types of negative reversals often indicate that the market is in need of a bit of rest at the least and sometimes they market the beginnings of a new pullback.  We shall see.

In economic news, the employment cost index came in at 0.4%, which was slightly below expectations.  There are no other major economic reports today.

A few earnings reports have also trickled in.  Home Depot (HD) is a standout on the upside as its stock is higher after reporting.  BBY and CPB are seeing their stocks move lower after reporting.

Asian markets were mostly lower overnight.  The PBOC in China said that it will widen its currency band and basically end its intervention in the currency market and establish a managed float.

Europe's markets are also lower.  The Eurozone ZEW Economic Sentiment index ticked up from 59.1 to 60.2.  Germany's economic index also improved to 54.6 from 52.8.  Norway's GDP expanded 0.7%.  And the EFSF approved an aid disbursement to Portugal for 3.70 billion euros, as expected.

The 10-year yield is up a touch today, and still hovering just above its 50-day average at 2.69%.

The volatility index remains low despite yesterday's market reversal, sitting at the 13 level.  So traders aren't looking for heightened volatility in the near-term.

Commodities are slightly higher today.  Oil prices are up a bit to $93.22 and gold prices are also slightly higher near $1275. Silver and copper prices are up also.

Trading comment: As we have said, it hasn't paid this year to raise a bunch of cash and get too defensive ahead of an expected market decline.  Pullbacks have been brief and shallow affairs and the better course of action has been to either just ride it out or trim some of your winners that have recently run and add it back to those stocks that are nearing new breakouts.  Right now many of the shale gas plays are undergoing corrections after huge rallies this year.  This could be an interesting group to watch, but we want to be patient until these stocks for new bases and start to reverse their current downtrends.


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