Tuesday, December 03, 2013

Was That Another Pullback?

Markets are lower in early trading, but just by a hair.  Yesterday markets were higher most of the day but faded late in the day to close near their lows.

It sure doesn't feel like it, but if the market closes down today it would be day 3 of this recent pullback since the S&P 500 made a closing high at 1808.  The SPX is currently hovering around the 1800 level, so this pullback certainly hasn't been much to speak of.  But if recent history repeats itself, the pattern has been for 3 days of weakness followed by more rallies.  Stay tuned.

There was no major economic data out today.  Friday is another important jobs report as it relates to the Fed's intention to 'taper', and folks are already talking about Friday's report affecting trading all week.

In company news, Rio Tinto (RIO) announced plans to cut next year's capital expenditure budget in half, reflecting the difficult environment as it relates to commodities and global growth.

Also, AAPL is trading nearly 2% higher after reports suggest that China Mobile has begun accepting pre-orders for iPhones.  AAPL stock is only up 5% this year, in a year when the market is up over 25%.  So it has been a big laggard.  We recently highlighted its breakout from the 525 level, and would not be surprised to see the strength carry the stock to $600 by year-end.

Asian markets were mixed overnight.  China's services PMI slipped to 56.0 from 56.3.  And the Reserve Bank of Australia left its key rate unchanged at 2.50%.

Europe's markets are mostly lower.  Eurozone PPI fell 0.5% last month while the year/year reading fell -1.4%.  Great Britain's construction PMI jumped to 62.6 from 59.4.

Bond prices are higher currently pushing the 10-year yield lower to 2.77%.

The volatility index is higher and touched 14.77 earlier this am.

Crude prices are spiking higher to $95.75 and we are hearing some chatter about Iran.  Gold prices are bouncing slightly from oversold levels, but still only near $1223.

Trading comment: The stairstep market continues.  And surprisingly, the SPX has held support along its short-term 20-day moving average since October 11.  That's a pretty long and rare streak to trade above the 20-day line.  While December is often a bullish seasonal month for stocks, the longer we trade in this fashion the more likely it is that we experience a sharper correction down the road.  It's been awhile since we have had a 10% correction, so folks will likely freak out when it occurs and ask if the bull market is over.  But our guess is it will probably be a good buying opportunity, if and when.  But that is not today's order of business.  Just putting it out there.

KAM Advisors has long positions in AAPL


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