Monday, March 31, 2014

Monday Morning Musings

Markets are higher in early trading and seeing a nice bounce so far.  Its hard to pinpoint a catalyst today so this could just be month end and quarter end effect in action.

Over the weekend, Putin called Obama to discuss the Ukraine situation.  While no big news came out of it, at least the dialogue can be viewed as a step towards diplomacy.  But the news didn't lift Asian markets or have much of an effect in Europe, so we can't look at that as the catalyst for stocks today.

In economic news, the Chicago PMI for March ticked down to 55.9 from 59.8.  So that isn't boosting the market either.

Fed Chairman Yellen spoke this morning and reiterated that the Fed remains short of its employment and inflation goals and that the economy requires 'considerable support for some time'.

Asian markets were mixed overnight.  Japan's manuf PMI fell to 53.9 from 55.5.  China was lower after continued reports about nonperforming loans weighed on investor confidence.

Europe's markets are slightly higher today.  French GDP rose 0.3%.  German retail sales rose 1.3%.  And the president of the Bundesbank said the eurozone is not in a deflationary cycle, which would decrease the odds of the central bank enacting an asset purchase program.

The 10-year yield is higher today to 2.74%, trading back above its 50-day average.

The volatility index is lower by 3% back to the 14 level. 

Most commodities are lower today with oil down slightly to $101.45 and gold lower near $1292.

Trading comment: Last week we saw a continuation of many leading stocks breaking down and entering corrections.  Most of the time that means the broader market is also likely entering a correction.  The Nasdaq is already below its 50-day average support, and the Russell 2000 is struggling around its 50-day.  So we want to maintain a somewhat defensive posture here and give the markets more room.  The S&P 500 looks to be in good shape technically, which could be from sector rotation out of high growth stocks into more dividend-type value stocks.  But we would still like to see how things shape up past quarter end and as we get into April and approach tax season.


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