All Eyes On Yellen

Stocks are higher in early trading after some positive overseas action last night as well as a positive response to Janet Yellen's testimony before Congress.

Yellen is testifying in front of the House Financial Svcs Committee and has pretty much put forth the same tone that Bernanke had laid out before her. She said that the Fed intends to maintain its current pace of asset purchase tapering.

Despite talks of continued taper, markets are sensing her dovish tone.  Stocks are near their highs of the day, and gold prices have rallied to $1285, nearly a 3-month high. 

Also, volatility expectations continue to come down with the VIX falling below the 15 level for the first time in two weeks.  It is currently -3% lower to 14.80.  But we will have to see if this early enthusiasm in the markets persists into the close later today.

Asian markets were higher overnight.  Japan was closed for a holiday.  In China, money market rates came down despite the PBOC choosing not to add additional liquidity.  Overnight SHIBOR rates fell 17 bps to 4.14%.

Europe's markets are also higher today.  Germany's finance minister said there is no danger of deflation in Europe.  In Spain, their finance minister said they are likely to hike their forecast for the country's GDP growth in 2014, which currently stands at 1.0%.

The 10-year yield is higher today to 2.71%.

Trading comment: The stock market is at an important juncture as the S&P 500 trades higher today and is nearing its overhead 50-day average.  We said the other day we thought this overhead resistance could prove difficult for the market to pierce on its first attempt.  The SPX is currently trading at 1806 while the 50-day average sits near 1809.  So we shall see.  The Nasdaq is already above its respective 50-day average, while the Russell 2000 small-cap index is not yet close to testing its overhead resistance.