Thursday, May 22, 2014

Chinese Data Still Points To Contraction

Our markets are higher again in early trading on some in-line housing data and possibly some perceived improvement in Chinese data.

In the US, April existing home sales hit a rate of 4.65 million units which was up from the previous month's rate of 4.59 million.  Also, leading indicators for April rose 0.4%.

Asian markets were higher overnight after China's HSBC PMI data rose to 49.7 from 48.1 last month.  Those figures were above consensus estimates and generated some enthusiasm.  But China's Shanghai Composite actually closed slightly lower after its initial rally.  Moreover, this reading is still below the 50 level that markets the delineation between expansion and contraction.  So don't pop the champagne bottles just yet.

Europe's markets are mixed to flat today.  Eurozone manuf PMI fell to 52.5 from 53.4.  And France's PMI fell back into contraction at 49.3 from 51.2 last month.

Oil prices continue to climb to $104.10 today.  And gold prices are also higher near $1298, but still unable to crack the $1300 level and stay there.

The 10-year yield is getting a little boost to 2.55%.  And the VIX is back to extremely low levels at 11.75.  Option traders would probably benefit from buying a little protection for the summer with volatility being this low. 

Trading comment: No real changes to recent commentary.  The Nasdaq and mid-cap indexes are trying to break above their respective 50-day averages.  That could embolden the bulls here for a bit and lead to new highs in the SPX as well.  But until we see new leadership emerge in the market we still want to proceed with cautious optimism as we head into the summer months when market corrections occur with greater frequency.

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