Wednesday, March 26, 2014

Is Window Dressing Propping Up Stocks?

Markets are higher again in early trading.  Yesterday we saw the market give up its early gains midday but gain some back again into the close.  This morning's early rally is showing some of the same patterns.

The rallies have come on lighter volume while selloffs have shown increasing volume.  That type of action isn't very bullish, leaving us to wonder if quarter-end window dressing might be propping up stocks?  Something to watch as we head into April.

In economic news, the February durable goods report showed a 2.2% increase.  That is a nice gain, but most of it was from aircraft orders.  Ex-transportation, durable goods rose 0.2%.

In corporate news, Facebook is lower this morning after announcing it will buy Oculus for $2 billion.  Also, FIVE and PVH are both higher after reporting earnings.  Not bad for a couple of retailers, an industry where there hasn't been much positive reactions lately.

Asian markets were mostly higher overnight.  China was down a bit as expectations of more stimulus from Beijing is being met with skepticism.  In Japan, the PM said that if the April consumption tax hike weighs on the economy the govt stands ready to announce additional easing measures.

European markets are also higher today.  The Bank of England said that the British economy is improving with visible gains in wages.

Oil is higher again near $99.75 while gold is lower again to $1305. 

The 10-year yield is trying to hold above its 50-day support at 2.72%.  And the volatility index is lower again, breaking below the 14 level to 13.88.

Trading comment: The market is mostly trading sideways again.  We have seen this pattern for the last couple years, and most of the time it has resolved itself to the upside.  But distribution days are piling up with selloffs coming on higher volume.  Again we just want to take a slightly more defensive posture and are using excess cash balances to add to things like alternative funds to keep portfolios diversified.


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