Monday, April 14, 2014

Monday Morning Musings

Markets are opening on a higher note this morning following last week's selloff and some positive economic and corporate news.

Over the weekend tensions in the Ukraine escalated with the country's army facing off against pro-Russian troops.  This had European markets lower this morning before trading in the US began.

But better than expected earnings from Citigroup helped boost the financial sector.  And the March retail sales report came in stronger than expected also.  This gave a boost to stocks in the US, and the Dow currently sits with a 100-point gain in early trading.

Asian markets ended mixed overnight.  Singapore's GDP rose 5.1%, as expected.  And China's vice minister of finance said Beijing will not enact new stimulus measures just to deal with short-term volatility.  The IMF recently warned that China could experience a hard landing.

In Europe, the ECB President said that the central bank stands ready to act and that continued strength in the euro will likely be met with stimulus measures.

Commodities are higher this morning, with oil prices up to $103.90 and gold prices higher near $1330.

The 10-year yield is getting a little bounce to the 2.65% level.  And the volatility index is falling 5% so far down to 16.15.  Last week the VIX touched 17.85 before reversing.

Trading comment: The market was short-term oversold coming into this week after last week's sharp selloff.  While this morning feels good, investors shouldn't be lulled into a sense of complacency.  The major indexes are all well below their 50-day moving averages, which tells us that we should still be in defensive mode.  Selloffs and corrections don't come in a straight line, so bounces along the way are a normal part of the correction process.  But this pullback likely has more time to put in, and solid bottoms come from retesting the lows and forming a new base.  That process is still ongoing.  As such, patience is the prescription of the day.

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