In The Money

Why The Facebook Halo Today?

2012-02-02T07:25:00.000-08:00

There is a lot of hype surrounding the upcoming Facebook IPO. Given it's size ($100b mkt cap?) and the number of user Facebook reaches, I can understand all the hoopla. But I find it a bit confusing why today, after Facebook has filed its S1, that all of the other publicly traded social networking stocks would be trading so much higher. Look at ZNGA, LNKD, GRPN, etc. and you see big gains in all of them. I find the action odd.

In earnings news, we continue to see most reports beating expectations. This morning's list of stocks reacting positive vs. negative is fairly balanced, but the stocks showing positive reactions are up a lot more than the small declines on the stocks showing negative reactions.

Among the earnings gainers are: MA, GMCR, QCOM, LVS, and NUS. Stocks declining on earnings include: AZN, CAH, DOW, CI, CMG, and AGN.

The large number of disappointments coming out of healthcare related stocks is weighing on the sector, with the healthcare etf (XLV) lagging this morning by quite a bit. Energy stocks are up the most in early trading.

In economic news, jobless claims were slightly below expectations. Q4 productivity was in-line with expectations at 0.7%, while unit labor costs were higher than expected at 1.2%.

Asian markets were higher overnight, while Europe is mixed this morning. The euro has been bouncing around the flat line this morning. Oil prices are lower to $96.75; gold prices are higher near $1757; silver prices are also higher, while copper prices are flat.

The 10-year yield is flat near 1.84%; and the VIX is down another 2% to 18.18.

Trading comment: More breakouts to new highs today. Check out RAX. See V. MA is also close. View QCOM. Here comes MELI. Obviously AAPL. And I could go on. Those waiting for a dip remain frustrated, causing them to ask, "Dude, where's my pullback?"

KAM Advisors has long positions in AAPL, MELI, GLD, and SLV

Stocks Back In Rally Mode

2012-02-01T07:44:00.000-08:00

The markets are nicely higher in early trade on a combination of solid economic data, good news out of Europe, and a bevy of solid earnings reports.

Europe's markets are higher today after a successful short-term debt offering in Portugal. Additionally, Germany, France, and the UK posted solid PMI manufacturing data. Asian markets were mixed overnight after one of China's PMI readings showed the sector still in contraction.

In terms of earnings reports here in the U.S., I like to look at how stocks are reacting to those reports. This morning we are seeing the number of stocks rallying on results significantly outnumbering those that are falling.

Among the positive reactions today are: BRCM, FTNT, STX, WHR, IACI, AET, TMO, and BEAV.

Declining stocks on earnings include: CHRW, AFL, and the big loser today - AMZN.

In economic news, the ISM Manufacturing index rose to 54.1 in January from 53.1 last month. Construction spending data for December showed a 1.5% rise, above expectations. The ADP payrolls report showed payrolls rose by 170,000 in January, but this was below the 200k figure economists were looking for.

The euro is getting a big bounce today at the expense of the dollar. This is helping commodities. Oil prices are up above $99 after falling hard yesterday. Gold prices are back to $1750. And copper and silver prices are higher also.

The 10-year yield is getting a small bounce to 1.83%. And the VIX is down -5% so far down to 18.45.

Trading comment: 'Don't fight the tape' is the mantra traders live by. So far this year, we have seen stocks stair-step higher and sector rotation keep the market moving up with few pullbacks along the way. Overbought conditions be damned. I often talk about performance anxiety among portfolio managers and I think the strong January we just had probably has most PMs caught flat-footed and looking for opportunities. One day we will wake up to a big enough selloff that it will make sense to step aside. But for the time being dips are being bought.

KAM Advisors has long positions in FTNT

Stocks Poised To Finish January On Positive Note

2012-01-31T07:31:00.000-08:00

Stocks are higher in early trading on several positive earnings reports as well as a bounce back after three straight down days in the S&P 500. Yesterday the S&P got down near 1300 before buyers stepped in. That level also coincides with the 20-day moving average for the SPX.

The S&P 500 is poised to close out January with solid gains. Those who follow the "January effect" will note that the Stock Traders Almanac says that as goes January, so goes the year. The implication is that when January shows gains, it bodes well for a positive year in the market.

In earnings news, we are seeing more positive reactions in stocks this morning than negative. Among the gainers are: PFE, BIIB, LLY, TYC, UPS, PCAR, HRS, MAT, and ARMH.

Stocks falling after report earnings include: XOM, AVY, MHP, ADM, and the big loser today - RSH.

In economic news, the Case-Shiller Index showed another 1.3% drop in November from October. The Chicago PMI Index fell to 60.2 from last month's 62.5. And the Consumer Confidence index fell to 61.1 in January from 64.8 last month.

Asian markets were higher overnight, and the euro is higher this morning after speculation over continued progress in Greek debt talks. This one has really been a yo-yo, with lots of ups and downs. There is also talk that European officials have reached some agreement on future bailout funds for the eurozone, but I haven't seen details.

Commodities are higher today. Gold prices are up to $1747, oil prices have topped $100 to $100.50, and copper and silver prices are higher as well.

The 10-year yield continues to languish, still hovering near the 1.83% level. And the VIX is up a touch to 19.55, but hasn't closed above 20 in nine days.

Trading comment: After 3 consecutive down days and a test of the 1300 level yesterday by the S&P 500, I would have expected dip buyers to come in stronger. The SPX has bounced back to 1312 as of now, but already in early trading the gains have faded. We will have to see if buyers come back in later today. Also, the market continues to work off its overbought condition. There are a lot more stocks reacting positively to earnings reports this morning than ones that are selling off. Also, the SPX is on the verge of a golden cross, where the 50-day crosses above the 200-day average. This generally bodes well for further gains in the market.

Monday Morning Musings

2012-01-30T07:20:00.000-08:00

The market is lower in early trading after closing last week higher for the 4th straight week. Guess how many times the market closed higher for 4 straight weeks in 2011? Zero. So it's the first time in awhile we have seen that streak. The market is also overbought and sentiment has risen to bullish levels in recent weeks. All of this sets the stage for a normal pullback-- possibly.

There isn't that much in the way of market moving news this morning, so the markets are taking their cues from overseas. Asian markets were lower overnight, and Europe is lower this morning. Concerns about Greece's ability to reach a compromise to its debt situation is weighing on Europe, and the euro is also weaker.

Commodities are sliding. Gold prices have eased back to $1725; oil prices are lower near $98.80; and copper and silver prices are down also.

There were a few companies reporting earnings this morning, but nothing too notable. Earnings season continues this week, but many of the biggies have already reported.

All 10 of the S&P sectors are lower so far today. Energy stocks are down the most, while utilities are down the least. Among international ETFs, China (FXI) is down the most in early trading.

The buying in the bond market has been furious since the FOMC meeting, and the 10-year yield continues to drop as a result. The 10-year yield is now below 1.85%, and nearing its lows from mid-December. Last year's lows back in September were 1.70%.

As for the VIX, it is spiking +9% today back above the 20 level. That's right about at the downtrend line that has been in place since late November, so we will have to see if that trendline holds.

Trading comment: We trimmed a few positions last week as the market got overbought, but will look to add back to positions on any further pullback. Usually the normal course of these short-term pullbacks is that the market gets overbought, pulls back a little to relieve that condition, and then rallies back again. If it goes on to make a higher high, the uptrend is in tack. But if the market makes a lower high, it is often a sign that a deeper or longer consolidation is in the works. For now, let's not get ahead of ourselves and see how quickly this dip gets bought. I think a lot of portfolio managers were not positions for the strong January we have seen and remain underinvested.

GDP Accelerates, But Still Below Expectations

2012-01-27T08:12:00.000-08:00

The markets are mixed in early trading, with the Dow and S&P lower but the Nasdaq higher. Advance estimates on Q4 GDP came in at +2.8%, which is below consensus which was looking for +3.2% but still above last quarter's reading of only +1.8%. For those folks still calling for recession, GDP needs to either going to fall off a cliff or we are going to see some big revisions.

In other economic news, The Univ. Of Michigan consumer sentiment survey rose to 75.0 in January from 74.0 last month.

Earnings reports are being greeted with much cheer this morning. Despite a handful of better than expected reports, very few stocks are higher after reporting today. The few that are trading higher include: HON, EMN, and INVN.

But the list of disappointing reactions is larger and includes: RVBD, F, CVX, PG, SBUX, and MO.

The euro is higher this morning, and helping most commodities. Gold prices are up to $1732; oil prices are still above $100; and copper and silver prices are higher as well.

The 10-year yield has stopped dropping for the time being and found some support at the 1.93% level for a 2nd day. The VIX is fractionally higher to 18.75 and also looks to be bottoming.

Trading comment: I still think this overbought market appears a bit tired and in need of some sort of rest. If the market closes lower today it will be the first back-to-back down days since mid-December. That's a pretty long streak. What will be interesting will be to see how quickly dip buyers come in and look to get more invested on any market weakness. I suspect this first pullback won't gain much traction before rallying again.

Is The Market Tired Yet?

2012-01-26T08:01:00.000-08:00

The market was higher in early trading, but has since faded back into the red. Yesterday's FOMC announcement provided some fireworks when the Fed said they would essentially be on hold with interest rates until "late 2014", and that they would remain extremely accomodative.

That isn't an explicit announcement of more quantitative easing (QE), but it sure is an implied one. Commodities wasted no time rallying, and everything from gold to silver to copper and oil took off. The CRB is up again this morning. Gold prices have reached $1725, silver and copper are higher, and oil is back above $100 to $100.50.

In earnings news, we are seeing positive reactions in stocks like: CAT, MMM, OI, JCP, and especially NFLX which is up 22% on a short squeeze.

Negative reactions include: T, VAR, UA, NVR, CTSX and SNDK.

In economic news, durable goods for December were better than expected at 3.0%, and last months orders were revised higher to +4.3%. Not bad. New home sales came in below expectations at 307,000, which is also below the prior months units of 314,000.

Asia was mixed overnight, while Europe is higher today on renewed optimism that progress is being made on Greek debt negotiations. The euro is also bouncing vs. the dollar.

The 10-year yield really plunged after yesterday's FOMC announcement, and today it is sliding further down to the low level of 1.95%. It is hard to tell if this is more a statement of a slowing economy or just the Fed pinning the long-end of the curve down with its 'operation twist'.

As for the VIX, it is up 2.1% this morning but still low overall at a level of 18.70.

Trading comment: I enjoy reading Jeff Saut's commentary each week. I have read him for years, and he often talks about these "buying stampedes" that we see in the market. Said stampedes usually last from 17-25 days, with very brief pullbacks along the way before eventually tiring out. Well folks, since this buying stampede started on Dec. 20th that is exactly what we have seen. And by my count today is day 25 of the current run. As such, I want to be careful about chasing things higher here. The market does appear poised for a rest. Hopefully that will provide a better opportunity to add to stocks that reported strong earnings and are poised to continue to lead.

KAM Advisors has long positions in: GLD, SLV, VAR

Apple Blowout Earnings Lifts Nasdaq

2012-01-25T07:48:00.000-08:00

The markets are mixed this morning with the Dow and SPX lower, but the Nasdaq higher after Apple (AAPL) reported blowout earnings last night. Expectations were already running higher for AAPL coming into the quarter, and many people feared the stock could sell off after reporting just due to profit taking. But the upside that AAPL reported was far greater than expected in nearly every category. Earnings blew past estimates, unit sales were record, and margins were much higher than we have seen. Currently AAPL is up 7% near $450.

A few other companies beat estimates but their stocks are lower after reporting, including UTX, BA, and COP.

In economic news, pending home sales for December fell 3.5%, which was below consensus. This doesn't seem to have moved the market much. Participants are likely waiting to hear the latest monetary policy statement from the Fed, which will be released at 2pm EST. The big question is whether the Fed will change its language surrounding holding rates low "until mid-2013".

In Asian, Japan was higher again while China and Hong Kong remained closed for holidays. Boy, they sure do get a lot of market holidays over there. In Europe, markets are lower amid continued delays with creditors in getting the Greek debt terms revised.

The euro is also lower relative to the dollar, weighing on commodities. Oil prices are down near $98, gold prices are lower to $1653, and copper prices are also slightly lower.

The 10-year yield is off slightly to 2.06%. Today is day 4 above the 2.0% level, but it will be interesting to see how it reacts to today's FOMC announcement. As for the VIX, it is up another 1.6% to 19.21, the 5th consecutive day below the 20 level. I think going long volatility will be a good trade at some point, but haven't done anything yet.

Trading comment: The market remains overbought but pullbacks haven't gained any traction. The SPX hit 1310 five days ago, and today it is still right at that 1310 level. So while bulls were hoping for a pullback so that underinvested managers could put more money to work, all the market has given us is some sideways consolidation. As such, it is very possible that the market continues to frustrate the majority (as that is it's job) and stair-step higher into month end.

KAM Advisors is long AAPL

Following The Greek Yo-Yo

2012-01-24T07:32:00.000-08:00

The markets are lower this morning after a failure to find solutions to Greece's debt problems has put pressure on Europe's markets and also the euro currency. Greece's stock index is down -4.0% this morning and weighing on other markets. Data released this morning showed the manufacturing and services PMI readings for the eurozone both improved in January

Overnight in Asia, Japan was up slightly despite lowering its GDP forecast for 2012. China and Hong Kong were closed for holidays.

In earnings news, stocks are showing a mixed reaction to reports from last night and this morning. On the upside are stocks like: COH, EMC, WDC, and VMW. On the downside are TXN, MCD, TRV, VZ, CSX. Tonight AAPL reports and many are wondering if it will have the sort of reaction seen in GOOG. I think AAPL will fare better, although the fact that it has recently run to new highs does leave it vulnerable to some profit taking on the news.

The dollar is higher relative to the euro, and that is weighing on most commodities. Gold prices have pulled back to 1665. Oil prices are back below $100 near $98.90. And copper prices are down also.

The 10-year yield is roughly flat near the 2.07% level. As for the VIX, it has bounced 5% in early trading to 19.55, and briefly touched the 20 level before fading a bit.

Trading comment: Growth stocks took a back seat to defensive stocks for most of 2011. So far this year, growth seems to be readying for a comeback. VMW reported a strong quarter and got a nice reaction, similar to FFIV last week. MELI sold off in 2011 but is back in position to challenge new highs. And recent trades we have talked about including STMP and ULTA are both at or near new highs as well. While I expect 2012 to be choppy similar to last year, I do think there will be more opportunities for growth investors.

KAM Advisors had long positions in AAPL, COH, GOOG, MCD, STMP, and ULTA

Are Yields Finally Reflecting Improving Economy?

2012-01-23T07:09:00.000-08:00

The 10-year yield is finally getting a nice boost, currently near a 7-week high at 2.08%. In recent weeks as we have gotten mildly improving economic reports the 10-year yield continued to drift lower as if the economy were going back into recession. But the last few days have seen a nice lift from the lows. I would like to see the 10-year yield stay above 2.0% on future pullbacks.

Stocks are strong out of the gate this morning. Stocks have now been up 3 straight weeks to start the year. That's a better start than last year although the market now looks pretty overbought short-term.

In earnings news, the only notable report I saw this morning was Halliburton (HAL) which beat estimates but it's stock is selling off. In other news, RIMM kicked out its co-CEOs as it looks for new leadership to get things back on track.

The positive tone to the markets this morning also comes out of Europe, where Germany held a successful debt offering. The euro is higher on this as well as continued chatter that a plan to restructure Greece's debt from default is ongoing. France and Germany have also called for easier capital rules for banks, which is helping boost financial stocks.

The dollar is lower this morning, which is boosting commodities. Oil prices are higher near $99.55. Gold prices are up to $1675. Copper and silver prices are also higher.

As for the VIX, I would expect it to be lower this morning but it is currently 2.6% higher to 18.77. Some of this could be related to options expiration last Friday, during which the VIX had a big plunge lower to 18.25.

Trading comment: The market continues to work its way higher with very little pullbacks along the way. This keeps it difficult for most people to jump on board as most investors don't like to chase stocks higher. It's hard to say how long this mini-melt up will last. The market is overbought short-term and sentiment is growing more bullish as well. But so far those factors have been trumped by underinvested portfolio managers putting money to work.

KAM Advisors has long positions in HAL

Google Drops The Ball

2012-01-20T07:46:00.000-08:00

Today's reactions to earnings reports are pretty mixed, with Google being the big loser so far. I think expectations were running pretty high for GOOG to report a good quarter. So when they missed estimates by a $1, investors hit the sell button in a hurry. GOOG is down -8% so far today on a big jump in volume. We will have to see if it can recoup any of its early losses into the close.

Another stock that is taking it on the chin is ISRG, which actually beat estimates by a nice amount. GE and AXP are also lower this morning. On the plus side are IBM, MSFT, and INTC.

In economic news, existing home sales in December rose to a rate of 4.61 million units (vs. 4.55 consensus).

Asian markets were higher overnight. China rose 1.0% despite a PMI reading of 48.8 which marks the 3rd straight month the index was below the 50 level which marks the line between expansion and contraction.

The euro is lower this morning. Although there is talk of an agreement on the Greek debt issue, a colleague just told me CDS spreads are widening on Portugal to new highs, and Portugal is a much bigger issue than Greece.

The 10-year yield is finally moving above the 2.0% level to 2.01% currently. That is just above the 50-day moving average. As for the VIX, it closed below the 20 level yesterday and is currently a bit lower to 19.65 despite the market being down a bit.

Trading comment: The market could have been down a lot more following the GOOG miss and the reactions to GE, AXP, etc. So I think it is a slight positive that the market is only down slightly so far (although it is still early). I think most investors remain in dip buying mode, as many came into the year under-invested and holding too much cash. I want to focus on those companies that continue to beat estimates and lead the market. Unfortunately right now I cannot put GOOG in that category.

KAM Advisors was long GOOG and IBM

Earnings Reports Continue To Recieve Positive Reaction

2012-01-19T07:45:00.000-08:00

The market is higher again in early trading, as earnings reports continue to roll in and garner positive reactions for the most part. Bank of America (BAC) actually reported an earnings miss but the stock is trading 5% higher as investors shrug it off and look forward.

Other stocks reacting positively to earnings reports include: FFIV, EBAY, and MS to name a few. Tonight we hear from big daddy Google (GOOG) and IBM, as well as ISRG and MSFT.

In economic news, the weekly jobless claims fell by 50,000 to 352k. This is the lowest initial claims level since 2008. Hopefully this will translate into improving monthly jobs figures and a decreasing unemployment rate. The market got a boost from this data.

Asian markets were higher overnight, and Europe is up slightly this morning. The euro is also higher again, which is helping most commodities. Gold prices are slightly lower near $1656, but silver and copper prices are higher. Oil prices are also higher again to $101.35.

The 10-year yield is finally getting a boost on some of this economic data. This morning it is up 8 bps to 1.97%, but still below that stubborn 2.0% level. I think at some point the 10-yr yield could have a big spike higher. As for the VIX, it is down -4% this morning right at the 20.0 level. A close below this level would be another sign of confidence for the bulls.

Trading comment: It's hard to chase stocks ahead of their earnings reports, which is probably one of the reasons that we are seeing nice pops in those companies that reports solid earnings. The market remains overbought, but investors are in dip buying mode and we haven't seen back-to-back down days in the market since mid-December. So far this year, the market is carving out a similar pattern to 2011. Last year the market rallied all they way to mid-February before its first correction. Growth stocks are also beginning to act better as the number of new highs on the Nasdaq is slowly rising.

KAM Advisors has long positions in: BAC, GOOG, IBM

Is The IMF Bringing Out The Bazooka?

2012-01-18T07:52:00.000-08:00

The euro is getting a bounce for a 2nd day today on the rumors that the IMF is looking to expand its lending capacity by $1 trillion. That's a pretty big figure, and it seems to be helping sentiment in Euroland. But I worry that folks could be getting too complacent with the sovereign debt issues.

Earnings reports are starting to come out. On the plus side this morning in reaction to their earnings are GS, which is up 5%, and APH which saw a huge gap higher at the open. On the downside are a couple banks such as STT and PNC.

In economic news, the Housing Market Index improved to 25 from 21 last month, which was a bigger jump than economists were looking for. This release helped boost the market when it hit the wires.

The lower dollar is helping most commodities. Oil prices are higher near $100.99. Most metals are higher too. Gold was lower earlier by just a little, but silver and copper prices are both higher today.

The 10-year yield does not seem to reflect any pending economic improvement as it still lingers near 1.86%.

As for the VIX, unlike yesterday when it wouldn't budge despite higher open today it is down by 2.5% in early trading to 21.65.

Trading Comment: The SPX is trying to stay above the 1300 level where it was turned away yesterday. Also, the 50-day average is quickly moving up and should soon break back above the 200-day average. This is know among technicians as a "golden cross" and would be another bullish sign for the market.

KAM Advisors had no positions in stocks mentioned

Markets Cheer Chinese GDP Growth

2012-01-17T07:41:00.001-08:00

Global markets were higher overnight and higher this morning after China's GDP came in slightly above expectations at +8.9% in Q4. This is one of the slower readings since 2009, but I guess folks are happy it wasn't worse. There is also chatter that Chinese officials don't want it to slow more, and will be looking to take the foot off the brake that has recently been applied to cool inflation.

In earnings news, Citi (C) is down 5% right now after disappointing earnings. Wells Fargo (WFC) was in-line, but the stock is higher. And Check Point Software (CHKP) is nicely higher after beating earnings and revenue estimates.

The euro is also higher today, despite a wave of sovereign downgrades from Standard & Poors. The biggest was to France, which got downgraded from AAA to AA+. Italy, Spain, and Portugal also got downgraded a notch. For now it looks like these downgrades were priced in and bonds are not being sold off as a reaction.

The lower dollar here is helping commodities. Gold prices are up to $1658, and silver and copper prices are higher as well. Oil prices are also higher, but not able to stay above the $100 level.

The 10-year yield is flat at the low level of 1.85%. I find this somewhat perplexing, as most other markets are rallying on good economic news, but the bond market here is pricing things as if the economy is going to slow more.

As for the VIX, I would have expected it to be down on today's rally but it is actually slightly higher to 21.0. It is still early, but the fact that the VIX hasn't budged would make me a little nervous about chasing this early market strength.

Trading comment: The market continues this stair-step higher pattern that we have seen before. I think we saw something similar in the early part of 2011. Pullbacks are brief affairs and have to be bought quickly if you want to continue to participate in the rally. The October high for the SPX was 1292. This area has been providing some resistance for the last 4 days, but today looks to be convincingly broken to the upside. A close above 1292 would be another bullish datapoint for the market. Earnings season really heats up this week, so get ready.

KAM Advisors and/or clients are long CHKP, GLD

Bond Auctions Improve In Spain and Italy

2012-01-12T08:04:00.000-08:00

The market was poised to move higher at the open after improved sentiment in Europe helped push their markets and the euro higher. Spain and Italy both held successful bond auctions where yields were well lower than they had been at previous auctions.

But some early economic data in the U.S. took the wind out of the market's sails. Retail sales came in weaker than expected at 0.1% (vs. 0.4% consensus), and retail sales ex-autos actually fell 0.2% in December. Also, weekly jobless claims were higher than expected.

Back to the ECB, President Draghi held the benchmark rate at 1.00%, but said that substantial downside risks to economic activity in Europe remain.

Asian markets were mostly lower overnight after some Chinese inflation data came in higher than expected. This calls into question just how easy China will become with monetary policy given that inflation is still a problem there.

The dollar is down which is helping commodities. Oil prices are higher near $102.25. Gold prices are also up to $1635. Copper and silver prices are higher as well.

The 10-year yield is getting a small bounce to 1.92%. But the overall low levels on the 10-year do not bode particularly well for an immediate pickup in economic activity.

As for the VIX, it is up 4% in early trading to 21.87. The recent downtrend in the VIX remains intact, despite the ongoing possibility for a move higher in the near-term.

Trading comment: The market continues to put together constructive price/volume action. Pullbacks have been contained well. There is talk about Greece having difficulty making its upcoming debt payments. This could cause the whole Euro debt issue to flare up again, as we know it hasn't been solved by any means. The market seems to be calm right now with those issues, perceiving that the 'kick the can' policies are effective. But at some point I expect the whole thing to flare up again. That may not be today's agenda, but it is something to keep in mind as investor adjust their asset allocations. We still have some hedges on just in case.

KAM Advisors and/or clients are long GLD, SCO, SH

Are We Starting To Decouple From The Euro?

2012-01-11T07:53:00.000-08:00

The markets are mixed this morning, but still doing better than I would have thought given that the euro is lower on the day. I have harped on the fact that whenever the euro was down over the last year you could pretty much bet our markets were down also.

So far this year we are starting to see a little decoupling from that relationship. I know its still early in the year, but so far the euro is down -2.0% since the start of the year while the S&P 500 has gained +2.5%. Hey, it's a start right??

European markets are lower this morning ahead of the ECB meeting tomorrow. Asian markets were mostly higher overnight, except for China which pulled back -0.4% after that 2 day surge.

Energy stocks (XLE) are down the most this morning, as oil pulls back near the $100.50 level. Gold prices are higher to $1643. Silver prices are higher also, while copper looks flat right now.

There isn't much in the way of market moving data this morning. Economic reports are light, and earnings season doesn't really kick into high gear until next week.

Trading comment: Recently I commented on the S&P holding solidly above its 200-day average. The two indexes that had yet to retake their 200-days were the S&P 400 Midcap and the Russell 2000 small-cap. But yesterday both of those indexes joined the senior indexes and now all of the major indexes are above their respective 200-day averages. The longer the S&P 500 stays around these levels the closer we get to its 50-day average crossing back above its 200-day average. Traders call this a "golden cross", and it would be another bullish sign for the market.

KAM Advisors and clients are long GLD, SCO

China Rallies Hard For 2nd Straight Day

2012-01-10T07:36:00.000-08:00

The markets are nicely higher in early trading, taking their cues from overseas markets which were up sharply overnight. Asian markets were up across the board, led by another 2.7% gain in China where expectations for easier monetary policy appear to be the catalyst.

In Europe, analysts at Fitch indicated that France and Germany are likely to maintain their top credit ratings in 2012. A lot of folks have been expected France to get downgraded, so this news emboldened the bulls and Europe's markets rallied hard.

The strong 2-day rally in China has helped economically-sensitive materials stocks (XLB), which are leading the early action. Financials (XLF) are strong too, while defensive consumer staples (XLP) stocks are lagging so far.

The dollar is only down slightly, but commodities have caught a bid as well. Gold prices are up near $1635, silver prices are higher, and copper is higher as well. Oil prices are back to $102.50.

The 10-year yield is only up slightly to 1.98%, still unable to get above that 2.0% level. And the VIX is down -4.7% today to nearly a 6-month low near the psychologically important 20 level. This is a good sign for the bulls, although I still feel like a short-term spike in the VIX could be coming if we get a sharp pullback in the market.

Trading comment: The market continues to power higher. Leadership is not as broad as it often is during market advances. The list of new highs is more littered with defensive type names rather than traditional quality growth stocks. That is another reason why I feel that not everyone has embraced this rally. I know that the sentiment surveys are growing more bullish on the one hand, but on the other hand it still feels like a market climbing the proverbial wall of worry.

-jordan kahn

Getting Ready For Earnings Season

2012-01-09T07:19:00.000-08:00

There isn't a whole lot in the way of market moving news this morning. After the close today Q4 earnings season will kick off with Alcoa (AA) reporting. I don't know that many people that key off of this report, but it is still the official start to earnings season.

Overnight Asian markets rallied led by China's 3% spurt higher. There were positive comments from Chinese leaders along with rising expectations for easing monetary policy after data showing an increase in lending and money supply. This is somewhat odd given the Premier's cautious comments last week, but nothing is normal when it comes to gauging China.

In early trading, financials (XLF) are leading the way while healthcare (XLV) stocks are lagging.

The euro is getting a little bounce vs. the dollar, and commodities are mixed. Oil prices are lower near $100.90 despite increased rhetoric with Iran. And gold prices are a bit higher to $1620. Silver prices are also higher, while copper looks lower right now.

The 10-year yield is flat around 1.96%. And the VIX is getting a bounce from Friday's low levels, currently 3% higher to 21.30.

Trading comment: Most of the major indexes are now above their respective 200-day averages, and have held those levels for more than a couple of days. I still think this bodes well for another push higher. The market is overbought short-term, which could be a headwind this week. I don't like taking large positions in new stocks ahead of earnings, but we do continue to trade around our long positions with an upward bias. We are still long most of our recent trades, including SCSS, ULTA, and STMP. AAPL shares remain our largest position, and the shares briefly hit a new all-time high this morning. Despite the high price tag, AAPL shares do not yet appear close to being overvalued.

KAM Advisors and/or clients are: long AAPL, SCSS, STMP, ULTA

Jobs Data Continues To Surpass Consensus

2012-01-06T07:55:00.000-08:00

The markets are lower in early trading, despite the better than expected payrolls report that was released before the open. The main weakness this morning likely remains concerns in Europe that are helping drive the euro lower again today. And I don't need to mention the contuining correlation between stocks and the euro.

The December nonfarm payrolls report showed the economy added 200,000 jobs, which is well above the 150,000 estimate. Private payrolls also grew more than expected (212k). Additionally, the unemployment rate ticked down to 8.5%. It was expected to rise to 8.7%.

So this is good news for the U.S. economy, although you wouldn't know it from the action in Treasuries. I would expect to see yields rising today, but instead the 10-year yield briefly rose to 2.0% but has since eased back and is now back to 1.96%. Not exactly an inspiring vote of confidence in the economy.

As we have seen all week, the Nasdaq is outperforming the S&P in early trading and bucking this morning's weakness for the most part. Among sectors, consumer discretionary (XLY) stocks are higher so far, while consumer staples (XLP) are down the most.

Asian markets were lower overnight, and China is not off to a good start to the year already. The dollar is higher, which is weighing on commodities. Oil prices are lower near $101.25. Gold prices are down to $1616. Silver prices are down also, but copper prices (JJC) are higher as of now.

As for the VIX, despite the morning selloff the volatility index is lower on the day. The VIX is currently down -1% near 21.25. This is a pretty bullish sign, as I think many traders expected volatility to pick back up once trading started in earnest in 2012.

Trading comment: The price action continues to be constructive in the major indexes. The Nazz has been outperforming nicely. And if you look at the intraday action in the SPX this week, you can see that most of the days showed weakness in the morning but the market picked up steam and closed flat to up those days. This means investors have been buying the weakness and in most cases augurs well for more upside ahead. Sentiment in yesterday's AAII poll showed too much bullishness, so that is one red flag. Additionally, the market is overbought once again. So I wouldn't load the boat here, but I have to give the market credit for the positive price action.

Market Shrugs Off Strong Jobs Data

2012-01-05T07:34:00.000-08:00

The market is lower in early trading, despite what looks like a very solid ADP Employment report. The data showed private payrolls increased by 325,000 for December, which is well above consensus estimates. We will have to see if the govt. payrolls report confirms this strength.

Overall concerns remain in Europe, where bond yields continue to creep higher and recent deposit data from the ECB shows a continuation of recent trends. Europes markets are lower, as is the euro. And we know that when the euro is down our markets are down.

In other US economic data, the ISM Services Index rose to 52.6 in December from 52.0 the previous month. Nonetheless December's reading was slightly below consensus estimates.

Also, December same-store sales are coming out and are a mixed back. Despite some solid results, the retail etf (XRT) is lower on the day by -1.5% so far.

The Nasdaq is outperforming the SPX so far for a second day. Energy and industrial stocks are early laggards, while healthcare and tech are down the least.

Commodities are mostly lower. Oil prices are down near $102.75, gold prices are only slightly lower to $1608, and copper and silver prices are down as well.

The 10-year yield is lower to 1.95% after trying to get above the 2.0% level yesterday. And the VIX is up 2.3% but still relatively low at 22.75.

Trading comment: Yesterday's price action was pretty constructive as the market was lower for most of the day buy rallied late to finish up slightly. Today the market has already bounced from its early lows and we will see if buyers come back into the picture late in the day. I would have thought we would have bounced more from that strong ADP report, but with the euro down a lot I understand the concerns. Growth stocks look good in early trading. One of our recent trades ULTA is spiking back above its 50-day average, which is a good sign. And the surprise stock of the week SODA is up another 6% in early trading and up 23% for the week. Not bad.

KAM Advisors and/or its clients are long QQQ, SODA, ULTA, XRT

'In The Money' Poll - 2011 results

2012-01-04T11:25:00.000-08:00

Congratulations to Andy Bell (hedgie in NY) for winning our 2011 forecasting poll. Andy had the SPX finishing the year at 1245, which was the closest guess to the actual finish of 1257.60. Andy will be receiving a gift card for his fearless forecast.

Overall, the In The Money pollsters average forecast for 2011 was for a 5.9% gain to 1332. This seemed like a relatively conservative forecast for the first half of the year but things changed markedly in 2H11.

For the 10-year Treasury yield forecast, the winner was Gary Smith (aka "The Internet"). Although Gary's prediction of 3.00% was well bullish of the closing level at 1.87%, it was the most conservative guess in the group. The average forecast for the 10-yr yield was 4.34% last year.

This year (2012) will be our 8th annual year for the poll. With nearly all of the tallies in, the average forecast for this year is for the S&P 500 to gain 8.5% (1364) on the year. That's only slightly more bullish than the Wall St. bigwigs polled by Bloomberg who are looking for SPX 1348 (+7.2%). Our gang also has the 10-year yield finishing 2012 at 2.77%.

Good luck to everyone in 2012!!

Taking Our Cues From Overseas

2012-01-04T07:33:00.000-08:00

There isn't a lot in the way of market moving news this morning, which leaves the market taking its cues from abroad. Yesterday's session proved to be the biggest up move in two weeks, so its normal to see a pullback. But there were also some developments overseas.

Yields are creeping back up in Spain, which is rekindling concerns in Europe. Also, the financial health of Hungary is now surfacing. These are weighing on the euro, and we know whenever the euro is down U.S. stocks are also down.

Asian markets were mixed overnight with Japan higher but China lower again. Premier Wen Jiabo made cautious comments about the country's economic outlook, which is never a good sign for one of the worlds largest and fastest growing economies.

All of the above had led folks to the safety of the dollar, which is hurting most commodities. Gold prices are adding to yesterday's gains near $1610. And oil prices are only down fractionally after hitting $103 yesterday. But copper, silver, and most other commodities are weaker on the day.

The 10-year yield is down slightly to 1.95%. You sure don't get the sense that the U.S. economy is picking up steam with a yield below 2.0%. Where's the love? As for the VIX, it is up 3% so far back to 23.65.

Trading comment: I was fairly impressed with yesterday's action. Volume picked up to its highest level in 7 trading sessions. And technically the SPX put considerable distance from its 200-day moving average, which should now act as support. Bullish sentiment among investors is rising, but not yet at alarming levels. So I think that this rally can push higher before we have another correction. I wouldn't be surprised to see the runup continue into Q1 earnings season.

Bulls Cheer The Start To The New Year

2012-01-03T07:15:00.000-08:00

The markets are sharply higher in early trading as the bulls cheer in the New Year. This buying interest was absent late last week as the market fell in the latter half of the week and pushed the SPX to close exactly flat for 2011.

Asian markets were strong overnight. India reported its best manufacturing reading in six months. Europe's markets are also strong this morning, with another meeting scheduled for Merkel and Sarkozy.

The euro is up and the dollar is lower, helping to boost commodities. Gold prices are rallying back up to nearly $1600 (+2%). And oil prices are up even more ($102.55) amid threats from Iran regarding Hormuz and blocking shipping lanes.

In the U.S., the December ISM Manufacturing index rose to 53.9 from 52.7 last month. But the market was already nicely higher before this data came out. Recent economic data has been strong, and I wouldn't be surprised to see upward revisions to Q4 GDP estimates soon.

The 10-year yield is also rallying up to 1.96%, but still below the 2.0% level that has been resistance of late. As for the VIX, it is down +3.5% so far near the 22.50 level. It will be interesting to see if the recent trend towards lower volatility persists, or if rhetoric out of Europe heats up again and drives volatility higher like in 2011.

Trading comment: The SPX is staging a strong breakout this morning. As you can see from the chart below, the SPX has been consolidating right at its 200-day moving average for the last 5 days. Today, it is spiking higher and putting some distance between what should now be support at that key moving average. This is a bullish sign and should lead to more short-covering if it holds into the close. As earnings season approaches, I also hope that we don't get any big preannouncements to the downside. We have already heard about some disappointments in the semi space, so reports related to those companies should be discounted already.

Stocks Set To Finish The Year Pretty Flat

2011-12-30T07:51:00.000-08:00

The market is roughly flat in early trading. If the SPX were to finish at these levels, it would be up less than 0.40% for the year. I think I heard CNBC say that would be the flattest year since 1970. Nevermind the volatility along the way that saw the SPX get as high as 1370 and as low as 1074. I for one am hoping for a decrease in volatility for 2012.

There is very little newsflow today both on the corporate front as well as any economic data. Yesterday saw broad-based buying but on very thin volume, which of course pushed things higher. Volume will likely be lighter today ahead of the holiday and with the US markets closed on Monday.

Asian markets were barely higher overnight, and Europe is mixed this morning. The dollar index is lower this morning which is helping boost commodities. Oil prices are near $99.35 but gold prices have bounced to $1571. Copper and silver prices are higher also.

The 10-year yield is a bit lower again today near 1.88%; and the VIX is up a little to just below the 23 level (22.89).

Trading comment: The SPX got back above its 200-day average yesterday. That means it was only below that key average for one day, which normally would be a bullish sign. With volume very light yesterday and year-end window dressing in effect, its hard to place a lot of significance on yesterday's action. I don't want to completely discount it, but I think we will get a better sense of the action when traders are back in full force next week. So I would give the nod to the bullish side of the equation here, but wait for confirmation next week before adding to my long positions. We still have seen fewer breakouts in leading growth stocks than we would normally see if a new upleg in the market were at hand. Let's hope 2012 brings more winners.

Happy new year to everyone--

Euro Lower On Lackluster Italian Auction

2011-12-29T08:28:00.000-08:00

The newsflow is relatively light this morning, and surprisingly our markets are higher despite the euro moving lower. The results from an Italian bond auction this morning were okay, but not strong enough to help boost the euro. Yields offered on the bonds were lower than last month's auctions, but still relatively high. 10-year yields in Italy remain above 7.0%.

The weakness in the euro is boosting the dollar and hurting most commodities. Oil prices have fallen back to $98.50, and gold is down again to $1530.

In the U.S., pending home sales for November came in above expectations with an increase of 7.3%. And the Chicago PMI for December was also above expectations at 62.5, in-line with the prior month.

The 10-year yield is fractionally higher to 1.92%; and the VIX is lower by 2% so far near the 23.0 level.

Trading comment: We haven't done a lot on the trading side of things this week. As portfolio managers know well, this is a busy week for us in terms of last minute tax-loss harvesting to offset capital gains, last minute IRA contributions, as well as any year-end rebalancing. So while you hear a lot of stories about trading slowing down, it is anything but slow at our firm. And next week the fireworks will start in earnest again.

Euro Breaks Recent Support

2011-12-28T07:57:00.000-08:00

In recent months, I have said repeatedly that all you need to do is look at what the euro is doing to know how stocks are faring. This morning the euro is breaking recent support levels and falling to fresh lows.

The drop in sentiment comes on news that the ECB's balance sheet has grown to a record 2.73 trillion euros. And despite positive Italian bond auctions this morning, bank deposits at the ECB are now at a record 452 billion euros. So although the stress in the U.S. stock market has eased in recent months, the stress on the interbank lending markets in Europe remains high.

Asian markets were slightly lower overnight, while Europe is mixed this morning. The drop in the euro and rise in the dollar is also weighing on commodities. Oil prices have eased back to $100.33, but are still high amid tensions with Iran threatening to close the Straight of Hormuz (a key shipping route for crude oil). Gold prices are also lower, down to $1575.

The 10-year yield was able to get above 2.0% for a couple days, but is back below those levels today. It is currently down near 1.94% after running into overhead resistance at its 50-day average.

As for the VIX, it is up another 5.25% right now above the 23 level. A lot of traders were looking for volatility to continue lower as we neared the end of the year and another 3-day weekend, but the last 2 days have seen a fair bounce in the VIX. That said, the VIX is still well off of its highs from recent months and much closer to getting back below the 20 level where it was before the market fell out of bed in August.

Trading comment: We have been pretty quiet here in year-end trading. The SPX is at key technical levels. Yesterday it close above its overhead 200-day average near 1259. A couple of consecutive closes above this level would have put the bulls back in front. But today we are trading back down below those key levels. We will have to see how the market fares into the close, but a quick turnaround back below the 200-day in one day's time isn't what the bulls were hoping for. The SPX has been up for 5 straight days, so I would expect some normal consolidation. But I would like to see a mild price drop.

Monday Morning Musings

2011-12-27T07:58:00.000-08:00

The market has opened fairly sluggish, possibly nursing a small hangover from the holiday festivities. I took Friday off for a little golf as the weather in LA has been sunny and nice. Now its back to the grind and seeing if the markets can add to their nice finish to last week.

Asian markets were mostly lower overnight, with Hong Kong still closed. And Europe's markets were mostly higher today despite the yield on Italian bonds hovering back near 7.0% again.

Volume levels will likely remain light for this shortened week. Corporate news is relatively light this morning, but SHLD is getting whacked on poor retail sales and the announcement that it will close more stores and draw funds from its credit facility.

In economic news, the Case-Shiller home price index showed another decline in home prices for October, as prices fell 3.4%. But the Consumer Confidence index for December rose much more than expected to 64.5 from 56.0 last month. We have seen some strong consumer confidence numbers this month and it will be interesting to see if that sort of sentiment continues in early 2012.

The dollar is a bit lower but so are most commodities. Gold prices have slipped below $1600 and copper and silver prices are lower as well. Oil prices are above $100, but this has more to do with comments out of Iran about possible supply disruptions.

The 10-year yield is roughly flat near 2.01%. And the VIX, which had gotten down near the 20 level last week, is spiking +6% to 22.15 currently despite the flat market. It could be that traders are anticipating a pickup in volatility in January and are buying ahead of the turn of the calendar. This is actually a trade that I am considering.

Trading comment: The market finished last week on a strong note after 4 straight up days. I had said I was looking for an early Santa Claus rally, and it will be interesting to see how things shape up this week. I have a sense that trading could simply be quiet as traders look to just hang on into year-end. But we could also see another push higher as last minute window dressing plays out. I would start looking for things that could reverse in January. Some stocks are very extended in here, and looked primed for a pullback. Other stocks are likely being sold just to take the losses and could rebound in January. But for now I am focusing on the former.

Slight Downward Revisions to Q3 GDP

2011-12-22T08:13:00.000-08:00

I'm getting a bit of a late start today, which is often the case when my parents are in town visiting. My kids are so excited to have them there, its hard to keep them from running in and waking my folks at the crack of dawn.

The markets are higher this morning, which would make for three straight gains in the SPX if it holds. Those waiting for the Santa Claus rally to start next week might be a little late to the party.

Asian markets were mostly lower overnight, but Europe is higher today after the ECB released results from its latest liquidity program, the Long-Term Refinancing Operation (LTRO). There was strong bank participation, which hopefully will prove to be a good think like TARP was in the U.S. (even though it was unpopular).

In economic news, Q3 GDP was revised downward a bit to 1.8% from its last estimate of 2.0%. But early Q4 estimates are for growth above those levels. The December Univ. of Michigan consumer sentiment reading came in at 69.9 which is up nicely from last month's reading of 67.7. And this week's jobless claims were lower than expected. So net-net, I view today's economic data as a glass half-full.

The dollar is flattish and commodities are mixed. Gold prices are lower to $1607, while oil prices are higher back to $99.60. Copper prices are higher also.

The 10-year yield is down slightly to 1.95%; and the VIX is falling further down to the 21.0 level. I view this as bullish in the short-term, but would probably look to get long volatility and expect another pickup in Q1.

Trading comment: The SPX continues to act well since bottoming on Monday. It is outperforming the Nazz this week after reversing yesterday's lows and finishing in the green. The chart below shows that today is the third day (so far) above the 50-day average, and now the overhead 200-day is in sight. It currently sits near SPX 1259. I think if this rally continues and people look to put more money to work into year-end we could take out those levels, but I don't expect it to be a straight shot. I also think money will be put to work in the winners, not the laggards, as portfolio managers try to add to their winners and make it look like they had big positions in those stocks.

Oracle Takes Away The Punch Bowl

2011-12-21T08:12:00.000-08:00

Asian markets rallied overnight, following the strong showing on Wall St. yesterday. European markets were also higher this morning on a report from the ECB that bank borrowing needs are being adequately met.

But following ORCL's disappointing quarterly report, tech shares are down heavily this morning and that is weighing on the overall market. ORCL's stock is getting hit and hurting anything that is related to CRM, cloud computing, etc. The Nasdaq 100 is down -2.0% early, while the S&P 500 is off -0.65%.

Among sectors, tech is down the most, while defensive areas like consumer staples and utilities are bucking the weakness so far and trading in positive territory. If will be interesting to see if dip buyers show up today in tech stocks.

On the plus side, Nike (NKE) had a solid quarterly report and its stocks is up nicely today, almost back to 52-week highs.

The dollar is higher vs. the euro today, which is weighing on some commodities. Oil prices are higher near $98.38, but gold is down to $1615 and silver and copper prices are lower as well.

The 10-year yield is adding a bit to get to 1.92%; and although the market is down this morning, the VIX is also nearly 3% lower to 22.55. I still think this continues to bode well for the bulls into year-end.

Trading comment: Tech stocks are getting destroyed this morning if they are related to cloud computing, etc. Stocks like AAPL and GOOG are holding up better. It will be interesting to see which stocks bounce back first. But those that don't bounce and continue to act as laggards should be avoided for now as year-end selling of losers could continue to weigh on them. As for the SPX, it has pulled back exactly to its 50-day average, which is acting as support so far. I think that is important. A 2nd close above the 50-day would be a bullish sign, and supportive of another move higher for the senior index. I would also like to see volume on today's pullback come in lighter than yesterday's rally. So let's watch for that.

long AAPL, GOOG

Is Santa In The House?

2011-12-20T08:02:00.000-08:00

Yesterday I mentioned that the stock market was getting oversold again and sentiment was getting more bearish, but that for the market to rally we just needed some catalyst.

Well along comes Spain and out of the blue they hold a debt auction that was stronger than expected. That really improved sentiment in Europe, along with some solid sentiment surveys in Germany and the UK, and got the euro rallying. We know that lately if the euro is higher, the stock market is higher.

Asian markets were up slightly overnight, but Europe's markets are up nicely today. The Dow has spiked nearly 300 points so far. In economic news in the US, housing starts and building permits were both better than expected. Homebuilder stocks are rallying on the news.

In corporate news, General Mills (GIS) came up short of consensus estimates and its stocks is lower. CVS issued an in-line outlook and hiked its dividend by 30%. Its stock is nicely higher.

The dollar is lower, which is boosting commodities. Oil prices have spiked up to $97.25, while gold prices are back above $1600 near $1618. Silver and copper prices are higher also.

The 10-year yield is getting a big boost to 1.90%, which is still a pretty low yield overall. And the VIX is down sharply again, falling more than 9% so far. The VIX is currently at 22.60 and if it closed at these levels it would be the lowest reading since late July.

Trading comment: It didn't feel very good to do some buying yesterday, but I feel much better about it today, lol. The SPX had been turned down by its overhead 50-day average the last few times. At the time, I said that I felt that was normal and that after a pullback and some consolidation we could see a successful move above that key moving average. So far today the SPX has broken above its 50-day which was at 1230. A solid close above that level should embolden bulls to do more buying and bears to cover shorts. We are still long are trading positions in SCSS, TSCO, ULTA, and STMP. We also added some IWM yesterday to add overall exposure.

KAM Advisors has long positions in all stocks mentioned

Lack of Catalysts To Drive Markets Higher

2011-12-19T07:58:00.000-08:00

The markets were higher in early trading, but have since faded as a lack of any significant catalysts exist today to help drive markets higher. There have been very few economic or corporate announcements. News out of Europe was also quiet over the weekend, with some continued chatter about whether the ECB will step up its bond purchases.

The big news even was the death of Kim Jong Il in N. Korea, and what that might mean for the transition of leadership in that country. Asian markets were down across the board overnight amid the uncertainty.

Financials have led the reversal lower this morning after the Basel committee said they would like higher capital requirements for the banks. Financials are down the most so far today, while healthcare stocks are up the most.

The dollar is up a bit today, which is weighing on commodities slightly. Oil prices are flattish near $93.60 and gold prices are also a bit lower near $1595.

The 10-year yield continues to languish down around 1.84%; and the VIX is currently up 3% right to the 25.0 level.

Trading comment: The major indexes were down an average of 3% last week, and the market is now back into oversold territory. I expect choppy trading to continue in this news driven market, but I think this week's trading will have an upward bias as people look for a potential Santa Claus rally to surface. Trading will likely continue to be light as many folks have simply called it a year and closed up their trading books. The rest of us will continue looking for profitable trades in investments on a daily basis.

Financials Lead Early Action Despite Fitch Downgrade

2011-12-16T08:25:00.000-08:00

The markets are higher again in early trading. Yesterday the rally faded as the trading session wore on. We shall see if the market can hang on to its early gains today. Today is also options expiration Friday which could make things a little more volatile, but usually most of the action happens at the open on these expiration days.

Financials are leading the early action. This despite Fitch downgrading the debt ratings of Bank of America, Goldman Sachs, and several European banks.

In economic news, the overall CPI came in flat for November, which was lower than consensus expectations. The core CPI rose 0.2%.

Asian markets were higher overnight, and most European markets are up this morning as euro bonds have seen a pullback in yields which has helped improve sentiment for the time being. The latest country looking for a bailout from the EU and IMF is Hungary.

The bounce in the euro and pullback in the dollar is helping gold prices bounce back to the $1600 level following a sharp 3-4 day selloff in the yellow metal. Oil prices are roughly flat near the $94 level. (We are still short oil via the SCO etf).

The 10-year yield continues to languish and has fallen all the way down to 1.86%. The bond market would seem to be pricing in more of an economic slowdown that most of the GDP forecasts that I have seen.

As for the VIX, it is now well below the 25 level which would signal a decline in the wild volatility that has been with us for months. It got as low as 23.50 this morning and is currently hovering just above the 24 level.

Trading comment: The SPX has bounced off of its overhead 50-day average both yesterday and again this morning. The 50-day sits near SPX 1228. That is the first level we need to close above for this rally to continue. Hopefully we don't get any more earnings warnings like we got from Intel. If so, I still think there is a shot for another push higher into year-end. I have been premature with this call, but did correctly point out that after the SPX tested its overhead 200-day moving average there would likely be a pullback and some consolidation first.

Chart of the Day: Is The Run In Gold Over?

2011-12-15T07:50:00.000-08:00

Below is the chart of gold. Over the last few days, gold prices have plunged and taken out some long-term support levels. You can see in the chart below that the gold etf (GLD) has now broken below its 200-day moving average. We have not seen this support breached in years.

If the 200-day is recaptured quickly, it could mean a shallow correction for gold. But if that key moving average is not recaptured in short order, it likely means gold prices are in for a longer, deeper correction process.

Gold prices often move inversely to the U.S. dollar, so that is a wild card in this scenario. In recent days, the euro has been very weak and there has been a flight-to-safety into dollars. If the debt situation in Europe continues to deteriorate I would expect the dollar to continue to act as a safe harbor. But I also wouldn't rule out EU officials making more announcements about "plans" to deal with the crisis which could continue to prop up their currency.

The next chart is the longer-term chart of the GLD going back to 2009. You can see that this is the first time that the long-term moving average has not held as support going all the way back to the early breakout in gold in 2009. So the recent price action is meaningful and as such I plan to keep the GLD front an center on my screens for the near-future.

For the time being, we have not trimmed any of our positions but will likely lighten up on future bounces.

long GLD

The Euro Is In Charge

2011-12-14T08:10:00.000-08:00

In recent months I have mentioned from time to time that if you want to know if the market is up or down on a given day, all you had to do was ask how the euro was doing. For the last few days, the euro has been under pressure and that has been weighing on the market.

Today, the euro is breaking down further and nearing a one-year low. Results from debt auctions in Germany and Italy failed to inspire any confidence. And the credit gauges in euroland have been deteriorating for weeks. I hope EU officials develop more of a sense of urgency.

The weak euro has pushed the dollar higher and led to a sharp selloff in commodities. Metals are down across the board today, led by silver. But gold prices are also getting hit hard and are now well below the $1600 level. Oil prices have also fallen down to the $96 level, a big drop from yesterday's rally to $100.

All of the 10 major sectors are lower so far, led by energy. Healthcare and utilities are down the least. Interestingly, REITs are actually mostly green on the day. Growth stocks are down the most relative to value stocks.

The 10-year yield is lower to 1.92%. It sure didn't stay above 2.0% for long. As for the VIX, it is up +7.7% today to 27.37, but still well below last weeks highs and yesterday it briefly dipped below 25 for the first time in months.

Trading comment: I have been trying to remain constructive on stocks, but this latest euro plunge is garnering all of the market's attention this week. The market is no longer overbought, and soon will be back to oversold levels. The SPX has broken below its 50-day average near 1226 and is currently trading near 1210. I don't want to see this 50-day average become resistance, so we need to see it recaptured in short order. Also, keep an eye on leading growth stocks, which had been looking okay but today are taking the brunt of the selling. I am watching our recent trades like RVBD, SCSS, TSCO, and ULTA closely.

long RVBD, SCO, SCSS, TSCO, ULTA

Dip Buyers Surface In Early Trading

2011-12-13T07:40:00.000-08:00

The market is higher in early trading, as buyers have stepped up to buy the latest dip that was yesterday's selloff. There isn't a whole lot in the way of positive news, but that hasn't gotten in the way of this morning's agenda to put some money to work.

The FOMC meets today and while there is some rumors of the Fed announcing further QE initiatives, I think the most likely scenario is to hear more of the same and that the Fed remains accomodative.

In corporate news, Best Buy (BBY) reported earnings that missed consensus estimates and its stocks is getting hit.

In economic news, retail sales were up 0.2% in November, which is less than expected. The combination of this report and poor BBY results is weighing on the retail sector this morning.

Asian markets were lower overnight, while Europe is getting a bounce this morning on little new news. There was some encouraging data out of Germany, but the euro is lower on the day so far.

Commodities are mixed. Gold prices are up a bit near $1670. Oil prices have been up the most, above $100 earlier, as news leaked out that Iran was looking to shut the Straight of Hormuz in some sort of military operation. But as news has come out that it remains open, oil has eased back from its highs.

The 10-year yield is getting a nice bounce near 2.05%. I think it would be a big positive for sentiment towards the economy if the 10-year yield could lift a little more. It did get up to 2.40% in October, but that rally was short-lived.

Probably the biggest suprise today was when I came in and saw the volatility index (VIX) down 9%. The VIX got as low as 23.27, although it has bounced from there. I actually bought a little VXX for a daytrade as these morning drops in the VIX never seem to stick for the entire session. But it is still a big positive if it can close below the 25 level.

Trading comment: Stocks are already off of the earlier highs as I finish this blog post. I expect trading to be relatively quiet until after the FOMC announcement when the fireworks usually begin. I don't expect any big surprises, but the market could still rally afterwards. Yesterday the SPX got down close to its 50-day support before bouncing. So the index has been squeezed between its overhead 200-day and its 50-day below. While the credit indicators are still flashing caution, I still believe we will see another push higher before year-end.

long SCO, VXX

Monday Morning Musings

2011-12-12T07:42:00.000-08:00

The markets are down sharply in early trading. So much for that bounce on Friday. As of now, it looks more like that was just a reprieve to the selling that started in earnest on Thursday. But let's see how the day shapes up.

Increased skepticism with Europe's latest "plan" has led to yields in countries like Italy and Spain rising again. Other credit metrics are also deteriorating today. Europe's stocks markets and the euro are all lower this morning.

The drop in the euro is boosting the dollar and hurting commodities. Oil prices are down to $97.65, and gold prices have plunged all the way to $1661. Copper and silver prices are also down sharply.

Asian markets were mixed overnight, with Japan higher but China down again. Some numbers out over the weekend suggested that growth decelerated for China in November.

Here in the U.S., Intel (INTC) lowered its outlook for the current quarter and that weighed on the tech sector and the overall market. INTC is blaming it on disk drive shortages (Thai flood), but most think it is also related to overall PC demand.

The 10-year yield is hovering just above that 2.00% level at 2.01%; And the VIX is up 4% so far near 27.45, but still well below last week's highs after that sharp move lower on Friday.

Trading comment: Selling has picked up again as the choppy trading since hitting the 200-day average continues. The lows on the SPX from Thursday are near 1231. So far today we have not broke below those levels, but if 1231 gives way we could see selling pick up steam. The enthusiasm over the can kicking from the EU summit last week seems to have faded quickly. I have mentioned that I thought most folks would be in dip buying mode into year end, and I still think that is the case. But I acknowledged the likely possibility of a pullback and more consolidation before the SPX made another stab at taking out is overhead 200-day resistance. I think that is what we are seeing now, but I still think buyers will step up again. So I will be patient and look for stocks that are holding up well to add to into this decline.

long SH

Stocks React Positively To EU Summit Announcement

2011-12-09T07:51:00.000-08:00

There weren't a ton of details provided about the new agreements that came out of the EU summit, but after yesterday's sharp selloff the news was enough to spur buyers back into the market.

The members agreed to tighter fiscal controls, with penalties for member nations that exceed budget deficits of more than 3% of GDP. They also stepped up the time table with which the ESM should enter the picture. But it looked to me like the dollar amounts they are talking about are still not enough to really ringfence the problems. Also, Britain decided not to sign and join into the agreement as they don't want to cede any fiscal sovereignty.

Asian markets were lower overnight, despite a CPI figure out of China that looked better than expected. Europe's markets are higher this morning, and the euro is getting a slight boost as well.

Commodities are mostly higher, except for oil prices which have been slight lower near $98.20 this morning. Gold prices are up to $1716, and copper and silver prices are higher as well.

In corporate news, both Texas Instruments (TXN) and DuPont (DD) lowered their forecasts. Those stocks are getting hit, but are not weighing on the rest of the market for the most part.

The 10-year yield is trying to get back above the 2.00% level after falling below it in yesterday's trading. And the VIX is down 7% so far down to 28.40 after spiking back above the 30 level yesterday.

Trading comment: We still have a long way to go into today's session, but so far buyers have already stepped up to the plate. I have said I thought we were in the timeframe of the year where most investors would be in buy-the-dip mode. And since yesterday was a pretty big dip by most measures, it is not surprising to see buyers come into the market. The SPX continues to consolidate underneath its 200-day average. I still believe it will make a successful breakout before year-end. But I also realized the credit gauges have not improved, and the chances for another correction in Q112 remain high.

Jordan Kahn and/or KAM clients are: long GLD, SCO, SLV, and SH

Quote of the Day

2011-12-08T11:50:00.000-08:00

From the UK paper The Telegraph:

"Draghi's insistence that the fiscal contract eurozone leaders are attempting to thrash out at their latest summit will be sufficient in itself to restore confidence is cloud cuckoo land. He cannot sincerely believe it. The problem in the eurozone is not fiscal indiscipline, though there has certainly been a lot of it, but current account imbalances entrenched by big differences in competitiveness. These cannot be made to go away with repeated rounds of growth stifling austerity, and as for Mr Draghi's claim that it is possible to have both fiscal austerity and decent growth provided competitiveness is improved, it's simply naive to believe that's what is going to happen in practice. In fact, most of the evidence from the eurozone periphery is that it is continuing to lose competitiveness against the surplus north, with Germany progressively improving its share of an ever-shrinking market. As long as that goes on, the debt problem is going to get worse, not better. This weekend's summit will do little to solve the fundamentals of this crisis. Only a fully functioning fiscal and political union, with tax and spending decisions centralised in one authority across all 17 nations can do that. Even turbo-charged by financial and economic crisis, that's a very long road indeed."

Draghi Pours Cold Water On ECB Bond Purchases

2011-12-08T07:53:00.000-08:00

The market is lower in early trading after a disappointing reaction to comments by ECB Pres. Draghi, who implied that the ECB would not step up its bond buying program beyond what has been discussed already. It's unclear to me why he is taking this tone, unless he is trying to get other players to get more involved. The EU summit is tomorrow (tonight actually) and maybe this is posturing ahead of it. We still don't know to what extent the IMF may get involved.

The ECB also cuts its main lending rate 25 bps to 1.00%. Draghi said there was no talk of 50 bps, and that the vote was not unanimous. The ECB also lowered its marginal lending facility to 1.75% from 2.00%. The Bank of England held its rate steady at 0.50%. And the Danish central bank cut its rate from 1.20% to 0.80%. So the liquidity spigot in Europe is opening, but I'm not sure even a fire hose can help more than just a temporary stop-gap.

The euro is lower on the rate cut news, and that is weighing on commodities also. Gold prices are lower near $1715, and oil prices are down to $98.75.

In the U.S., jobless claims fell more than expected to 381,000, but folks are already complaining that this figure was seasonally adjusted and is thus skewed.

The 10-year yield has eased back to 2.00%, that key level that we can never seem to hold above for too long. And the VIX is spiking +4% higher so far and has touched the 30 level again (currently 29.80).

Jon Corzine is testifying before Congress this morning about the MF Global disaster. He'll probably say that he just didn't know about the fund diversion. I don't expect them to get a lot of answers and clarity from him. What a fall from grace.

Trading comment: The biggest news item this week will be the announcement that follows tonight's EU summit. The market has recently rallied up to overhead resistance, so its normal to see a pullback from those levels. The hard part is gauging how the market will react to tomorrow's announcement. A positive reaction could result in a successful breakout above recent resistance. But a negative reaction could easily take the SPX back down to its 50-day average below. I'm betting we have a little more correcting to do, but hoping its not too big. I still think that most participants are in buy-the-dip mode into year-end. That said, I hope the EU officials bring out the howitzer.

ECB Extending More Liquidity

2011-12-07T08:05:00.000-08:00

The markets are lower in early trading, but there has not been much news. Asian markets were higher across the board overnight, while Europe is up slightly this morning.

The ECB has said that it will loosen the criteria for loan collateral, which is an attempt to provide more liquidity to member nations. Tomorrow the ECB will have its policy announcement and many investors are hoping that they ease monetary policy further with an actual rate cut. Of course, the big event this week is the outcome of the EU summit on Friday and what they will say in terms of any big initiatives to deal with the debt crisis.

The euro is down slightly on the news, and most commodities are flat. Gold prices are actually up a bit near $1734, but oil prices are lower and have broken the $100 level.

Energy and financials are lagging the action so far this morning, while healthcare and utilities are down the least.

The 10-year yield is lower to 2.06%; and the VIX is +3.5% higher near 29.25.

Trading comment: If you pull up that chart of the S&P 500 you can see that once again we were turned away at overhead resistance near the 200-day average, which sits near 1264. The market hit that level again yesterday but faded, and this morning is moving lower still. I expect some consolidation around these levels, with an eventual successful push above these resistance levels. I would actually prefer to see the market pullback ahead of the EU summit meeting. I worry that if we rallied straight into the meeting, that might increase the chances of selling off harder after the news comes out.

S&P Puts Most Eurozone Members On Downgrade Watch

2011-12-06T07:40:00.000-08:00

The market is flattish in early trading on lot a lot of news here in the U.S. The big news release came last night when S&P analysts put 15 eurozone members on credit watch for a potential downgrade. It's a bit odd that they would do them all at the same time, but not that surprising given the state of the finances among member nations.

Asian markets were lower overnight, and European bourses are down this morning as well. The dollar is slightly higher vs. the euro, and commodities are mostly lower. Oil prices are off slightly to $100.66 and gold prices are also lower near $1713.

The 10-year yield is still above its 50-day average at 2.06%; and the VIX is down a fraction to 27.65.

Other than that there is not a lot of domestic economic data or corporate news that is moving the market. Defensive sectors like healthcare and utilities are leading the market so far while financials are lagging the action.

Trading comment: The S&P bumped its head at its overhead 200-day average for a second day and moved lower from there. The index is still below those levels but does not seem to be giving up much ground so far. The S&P 500 is now barely in positive territory for the year, and I think that performance anxiety will continue to be a factor from here into year-end. That means I expect dips to be more shallow than in recent months as more participants look to use pullbacks to their advantage. The put/call ratio opened very low this morning, which also lends itself to this thesis.

Monday Morning Musings

2011-12-05T07:28:00.000-08:00

Market participants are back in buying mode this morning despite last week's outsized gains. The positive sentiment has been helped by rumors out of Europe that the ECB is preparing to inject 1 trillion euros into its financial system to support the debt purchases in the region. It is unclear where the trillion euros will come from.

Also, Italy has established a new austerity plan. While the markets applaud this long-term thinking, don't forget that austerity measures will weigh on growth for years to come.

In economic news, the ISM Services index slipped a bit to 52.0 from 52.9 last month, but is still at a level that signals expansion in the sector.

Asian markets were mostly higher overnight, but China fell -1.2%. The dollar is lower today as the euro gets a boost. This is helping most commodities, but gold is heavy and trading a bit lower near $1748. Copper and silver prices are higher, and oil prices are up to $102.

The 10-year yield is getting a boost to 2.10%; and the VIX is drifting lower down -3.5% to 26.55 currently.

Trading comment: On Friday I showed that chart of the SPX reaching resistance levels. That level held as resistance on Friday and turned the market lower. But this morning a little good news (Europe) goes a long way, especially when you are in the final stretch to year-end and performance anxiety among portfolio managers is at a high. Buyers have pushed the SPX right back to that resistance line, which also coincides with the overhead 200-day average of the market. I'm not sure if we will stay comfortably above this level (1265) this week, or if we need to see a little more consolidation. But it does feel like if we don't get any real disappointing news that the market does want to make a successful push above these levels.

Chart of the Day

2011-12-02T12:18:00.000-08:00

I mentioned in my opening post on the main page that the market had reached important resistance. Here is the chart:

Hopefully you can see that purple trend line drawn in that I had been watching since early October as support for the SPX. Well on 11/17 you can see that the SPX broke decisively below that trendline, and the market had a correction.

Now, the market has rallied all the way back to the underside of that trendline. That seems like a logical place for the market to take a breather, and I have trimmed more of our trading positions today.

Unemployment Rate Drops To March 2009 Levels

2011-12-02T08:06:00.001-08:00

The market is higher this morning on the heels of further action in Europe to deal with the debt crisis, and an in-line employment report.

Europe was already higher this morning after news out that the ECB would loan the IMF 100-200 billion euros to fight the debt crisis. This is a backend way to get the IMF involved, by the ECB giving them the initial funds. But 100-200 billion euros is a drop in the bucket, and there is going to have to be much more involvement. I suspect EU officials will try to bring in more funds from surplus countries like China, Brazil, etc.

Here in the U.S., the nonfarm payrolls report showed that the economy added 120,000 jobs, in-line with estimates. Private payroll additions were a little higher at 140,000 (also in-line). But the big surprise was the unemployment rate, which dropped unexpectedly to 8.6%. It is now back to levels we haven't seen since March 2009. Some will argue that it's due to more people dropping out of the labor force, but that still leaves fewer people looking for jobs.

In corporate news, RIMM lowered guidance and said it will take a charge related to its Playbook inventories. That means it couldn't' sell as much as it thought, as iPad remains the #1 tablet. It's stock is down -9% so far. As for WDC, it's up 10% after raising guidance and saying it will resume production that had been halted due to flooding in Thailand.

The euro is lower today, but that isn't really hurting commodities. Copper prices are higher, and oil and gold are steady. Oil prices are still hugging the $100 level, and gold is up slightly near $1753.

The 10-year yield is easing back a bit to 2.07%; and the VIX is down -3.6% right now to 26.40. It had been down to 25.30 earlier before bouncing higher. As I have said, a move below 25 that sticks would likely embolden the bulls to be even more "risk on".

Trading comment: The market has now been up big for 4 of the last 5 sessions, even though we still have a long way to go today. But I will post a chart later that shows that the market has reached some important resistance levels and is likely due for a little pullback. I am trimming a few positions just slightly, and will wait to put more cash to work on said pullback vs. chasing things here. I hope I'm right. We are also getting into the time of year when performance anxiety peaks and where more good news out of Europe over the weekend could lead to additional short-covering.

Looking For Market To Take A Breather Now

2011-12-01T07:46:00.000-08:00

The markets are roughly flat after yesterday's outsized rally. Yesterday was one of the biggest point gains on record for the Dow. The only problem is that if you look at the list of the biggest point day, almost of all of them were bear market bounces that didn't last. Let's hope this time is different.

Same-store sales reports have been coming out for retailers and have been a mixed bag for the most part. On the upside are stocks like ROST, COST, JWN, and GES. But there have been some big disappointments such as LULU and KSS.

In economic news, the ISM Manufacturing Index for November came in at 52.7, which is a nice bounce from 50.8 last month. China's PMI last night came in below expectations and dropped below the 50 level, which marks the delineation between expansion and contraction.

Europe's markets are mixed this morning after bond auctions were held in Spain and France. The euro is slightly higher, while commodities are mixed. Oil and gold prices are both roughly flat so far at $100.50 and $1750, respectively.

The 10-year yield is higher again to 2.10%; and the VIX is down -1.55% so far near 27.37.

Trading comment: Yesterday's gain came as a big surprise to most investors. Especially since the night before S&P had downgraded the banks and the futures were pointing to a lower open. The coordinated action by the central banks led to a sharp short-covering rally. The question now is will it be more similar to 1998 when the Fed action sparked a lasting rally or more like 2008 when there was more downside to come? I would not rule out the possibility of performance anxiety kicking in between now and year-end and pressuring portfolio managers to do more buying in hopes of adding performance. I know that's how I feel on a day like yesterday.

Central Banks Coordinate Move To Ease Credit Crunch

2011-11-30T07:48:00.001-08:00

The markets are up big this morning on the news that a group of the world's largest central banks have coordinated a liquidity injection into the banking systems to help ease the tightening credit conditions that we have been talking about of late.

The action included the Bank of Canada, Bank of England, Bank of Japan, the ECB, the Swiss National Bank, and the Federal Reserve. They said, "The purpose of these actions is to ease strains in the financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and to help foster economic activity".

The central banks agreed to lower the pricing on U.S. dollar liquidity swap arrangements by 50 basis points. This is intended to help foreign banks who where having difficulty with short-term funding in the market.

Investors are viewing this as a positive sign that the central bankers learned their lessons from 2008 and appear steadfast in their intention to be proactive in avoiding another credit crunch and banking crisis.

Additionally, there was some positive economic reports in the U.S. The ADP Employment report showed payrolls increased by 205,000 in November, far more than the 125k consensus. Moreover, last month's payrolls data was revised upward to 130,000 gain. The Chicago PMI report also improved to 62.6 in November from 58.4 the prior month. So that is a good indication that manufacturing activity continues to expand.

Europe's markets are sharply higher this morning, and the Dow is up over 400 points so far. The euro is also higher which is boosting commodities. Copper prices are up 6%, silver is rallying, gold prices are $30 higher above $1750, and oil prices are back above $101.

The 10-year yield is up to 2.09% today; and the VIX is down nearly -9% to 28.0, though it has already bounced higher from its earlier lows. At the end of October it was below 25, so it still has some room to move lower if this rally is to have legs.

Trading comment: This is already a big move. The time to buy was last week, when bearish sentiment was on the rise and the market was extremely oversold. When those two combine (bearish sentiment and oversold technicals) it is usually a good setup for a market bounce. Then you just need a catalyst to spark the buying, which is what we got today with the central bank action. From last Friday's close, the SPX is already up 7%. I wouldn't chase today's strength, but I think you can continue to buy dips in here.

Consumer Confidence Jumps

2011-11-29T07:45:00.000-08:00

With all of the negative news in the media, you would think that consumers would simply remain downbeat until they see clearer signs of job growth, a housing rebound, and an improvement in Europe. But today's consumer confidence number was a big surprise.

Stock futures were barely higher prior to its release, but jumped afterwards. The Consumer Confidence Index for November spiked to 56.0 from 39.8 the prior month. Moreover, consensus estimates were only for 42.5. So that is a nice bounce in consumer sentiment, and could be play into solid holiday sales which began with a strong Black Friday for retailers.

Asian markets were higher across the board overnight after the strong rally here in the U.S. And Europe is higher this morning despite rumors that S&P might be looking at France's sovereign debt rating for a possible downgrade.

In corporate news, Tiffany (TIF) gave disappointing guidance and its stock is getting hit. Also, AMR has filed for Chapter 11 bankruptcy and will being a reorganization. Silly airlines.

The 10-year yield is higher to 2.04%; the dollar is lower, helping commodities; oil prices are up near $99.50, and gold prices are slightly higher to $1715; as for the VIX, it is down another 2.25% to 31.40, but even at a level above 31 traders are expecting continued high levels of volatility. The VIX hasn't been below 25 for more than a day since early August.

Trading comment: I said yesterday that I felt the market was very oversold, sentiment had grown more bearish, and the market should be able to add to yesterday's bounce. I still feel that way, even though volume yesterday was nothing to write home about. The SPX has been in this trading range of roughly 1150-1250 for a couple months, and could stay there. If so, then current levels are roughly at the halfway point of said trading range. In this environment, the best strategy continues to be buying the dips and selling big rallies. You have to take small profits when you have them, otherwise you are simply riding the waves up and down but never making much progress.

Hope Springs Eternal In Europe

2011-11-28T07:31:00.000-08:00

The market put in a dismal week last week, with no Thanksgiving bounce like we often see. Coming into today, the S&P 500 had been down 7 straight sessions, which puts the market in an oversold position.

Lo and behold, rumors of new progress in Europe have sparked interest in buying the recent dip and the markets are sharply higher in early trading. Asian markets were higher overnight and Europe is up strongly this morning.

In Europe, the IMF is working on loan support for Italy. And there is also talk about a new eurozone fiscal pact that would make budget discipline legally binding and enforceable by EU officials. This new amendment to the Lisbon Treaty has been pushed by Germany's finance minister who thinks this initiative would be the best way to calm market fears.

There have also been lots of talk about the strong holiday retails sales that started with Black Friday last weekend. The retail etf (XRT) is up nearly 4.25% so far today, leading the early action.

The energy and materials sectors are also up strongly with commodity prices bouncing. Oil prices are back above $99 and gold prices are up near $1717. Silver and copper prices are up nicely as well. The bounce in the euro is helping the CRB gain 1.5% so far.

The 10-year yield is trying to stay back above the 2.00% level (currently 2.04%); and the VIX is down -7.6% so far to 31.85.

Trading comment: There seems to be a lot of enthusiasm this morning to take advantage of the recent market dip. But there is still a lot of overhead resistance, and given the way the market has traded recently most investors are probably defensively positioned. If the news in Europe is for real, and can gain additional traction, that would be very good for the market. But if things flare up again across the pond, this could easily turn out to be another one-day wonder and disappointment. So I don't want to get too aggressive just yet.

Early Look: Q2 GDP Revised Lower

2011-11-22T07:52:00.000-08:00

The market is under a bit of selling pressure in early trading after briefly bouncing into positive territory. The concerns out of Europe persist, and the failure by the Super Committee to do anything regarding the U.S. deficit hasn't helped sentiment.

Bond yields are slightly higher in Europe as the bond vigilantes continue to pressure those governments. The cost of insurance in the CDS market also continues to rise, not just in Europe but emerging market CDS prices are also moving up.

In economic data, the second revision of Q2 GDP was revised down to 2.0% from an initial estimate of 2.5%. There is not much else in the way of corporate and economic news this morning.

Asian markets were mixed overnight and Europe is actually higher this morning on bargain hunting. Oil prices are up near $98 and gold prices are higher to $1700 after getting hit hard yesterday.

The 10-year yield is flat near 1.96%; and the VIX is down a little to 32.55, fading back below its 50-day average.

Trading comment: With the SPX now below its 50-day average as well as its 200-day, traders will move to an even more defensive posture. The news backdrop is very negative right now, and that should push investor sentiment back towards the bearish side of the ledger. While there are few stocks breaking out here, this could be a good time to go back and look at those stocks that were breaking out after reporting earnings and have now pulled back. When the market does find its footing, those names will likely be the first to start moving higher again.

Monday Morning Musings: All Policy, All The Time

2011-11-21T07:48:00.000-08:00

All policy, all the time. That's how it feels in the markets right now. There is very little moving the market lately from a fundamental standpoint, but very large moves from anything policy related.

Most of the policy decisions have been coming out of Europe with respect to the debt problems facing the region. Today we have more of the same concerns, with Moody's adding some cautious comments about the outlook for France's debt rating.

But the failure of the deficit reduction committee here in the U.S. is also adding an element of uncertainty and disappointment in the markets. Our Congress sure doesn't seem to possess the ability to be able to reach any solutions about our own fiscal problems, and that's not pleasing to investors.

The flight to safety is on, with bond prices rising and pushing the 10-year yield down to 1.95%. The dollar is also higher relative to the euro, which is weighing on commodities. Oil prices are down near $95.75, and even gold prices are lower today to $1702. As for the VIX, it is up another 8% to 34.65, but not above last weeks' highs.

My quote screen is for the most part a sea of red this morning. One of the lone standouts on the upside is VRUS, a former long of ours but one which we sold earlier this year. VRUS is being acquired by GILD for $137, an 85% premium. Congrats if you held any of this.

Trading comment: The S&P 500 has now broken below its 50-day average as the selling pressure intensifies. While we could easily see a bounce this week, volume levels will be very light due to the holiday trading. With the credit indicators still flashing warning signs, I want to remain cautious here and try not to be aggressive. Let the market find some support and build a base from which to launch another trading rally. No need to be a hero, as bases take time to build.

long SH

TGIF - The Song Remains The Same

2011-11-18T08:10:00.000-08:00

The news backdrop is little changed today. Concerns about the sovereign debt issues in Europe have eased just a touch on the comments by new ECB Pres Draghi who urged officials to move to make progress on the bailout plans.

Bond yields in Europe have stopped rising for the moment. Italian yields are at 6.68%, Spain is down a little to 6.43%, and France is also lower near 3.56%. And the euro is also getting another bounce today.

Commodities are mostly higher. The CRB index is up 0.5%; Gold prices are up a bit to $1725; silver and copper prices are also higher; but oil prices have slipped back to $98.50. With the global economy still slowing, it seemed odd that oil could keep up its recent trajectory that took it back above $100.

So far the materials stocks are leading the early action, while tech is lagging for a second day.

The 10-year is hovering right at that psychological 2.00% level; and the VIX which surged above 35 yesterday has pulled back -4% so far back near the 33 level. I have mentioned repeatedly that the VIX remaining stubbornly above the 30 level was indicating volatility would creep back into the market. I think some of the sharp pullbacks we've seen in the last week are prime examples.

Trading comment: It is said in the market that from failed moves come fast moves. I think that applies to yesterday's selloff. After the SPX broke that uptrend line that I have been watching, selling in the market picked up steam and the SPX quickly fell towards its 50-day average. This is a first area to look for support, around the 1205-06 area. Unfortunately, we have more policy decisions that will color the action coming up. The "Super Committee" as its called is supposed to vote on budget cuts and I think very few people if any think that they will actually be proactive in coming up with a proposal that will please the markets. Color me skeptical.

Early Look: Can The U.S. Start To Decouple From Europe

2011-11-17T07:33:00.000-08:00

The market had another down open this morning, but as of this post the Dow is back in positive territory. Asian markets were mixed overnight, while Europe is again lower today.

The latest news out of Europe was a disappointing debt auction in Spain. Spanish yields are up to 6.70%, and French yields are a bit higher near 3.71%. Italian yields have eased a touch to 6.97%. Interestingly, the euro is higher on the day.

But the higher euro isn't helping commodities so far. Oil prices are down to a still high $101; gold prices are lower again near $1745; and silver and copper prices are lower as well.

In economic news, jobless claims came in better than expected at 388,000 for the week. And housing starts for October were also greater than expected at 628,000.

The 10-year yield is hovering right at the 2.00% level; and the VIX bounced to 34 where it touched its overhead 50-day average and has since eased back to 32.90.

Trading comment: The S&P 500 has broken below that uptrend level that I showed yesterday (on my blog) and that has been in place since early October. That usually signals more of a correction in store. But I am beginning to wonder if the U.S. markets have priced in the problems in Europe and can manage to climb the wall of worry a bit more into year end. As such, I want to be a buyer on upcoming dips and position myself for further rallies. Of course, this is predicated on nothing further unraveling in Europe. They still need to figure out how to achieve the proposed leverage for the EFSF that has been talked about.

Chart of the Day: Holding support

2011-11-16T12:50:00.000-08:00

Not sure how well you can make out the chart below (you can click on it to enlarge). It is a snapshot from my trading software. On the right hand side, you can see the purple trendline I have drawn in highlighting the recent uptrend that the market has been holding since early October.

Today's pullback is testing that uptrend line again and needs to hold. If this support is broken, it could mean a larger correction is in store.

The news that took the market down in the last hour was comments by Fitch that the Eurozone contagion poses a threat to U.S. bank ratings. Umm...is this new news?

Early Look: Dour Sentiment Drives Soft Market Open

2011-11-16T07:53:00.000-08:00

The market is lower again in early trading. Yesterday we saw a weak market open that improved as the day wore on. So far, we have already seen a nice bounce since the open, but there is still a lot of time left in today's session.

Asia and European markets were both lower overnight. Italy's bond yields are higher at 7.13%; Spain's yields are up to 6.41%; and France's yields have drifted higher to 3.68%. The euro is also lower so far today.

The lower euro is weighing on most commodities, but oil prices continue to climb. Oil prices have now topped $100 for the first time in 5 months (currently $101.80). Gold prices are lower today near $1763. Silver and copper prices are also lower.

In corporate news, Target (TGT) reported solid results and its stock is higher. Abercrombie (ANF) disappointed and its stocks is getting whacked. While DELL was mixed and its stocks is down slightly.

In economic news, the CPI fell in October by 0.1%. But year-over-year the overall CPI is up +3.5%, which is pretty high. Inflation is funny right now. Wages, rents, housing prices, and tech products are pretty flat in pricing. But food prices, education, and healthcare costs have all continued to rise.

The 10-year yield is flirting with that 2.00% level again, but holding so far at 2.02%. As for the VIX, it is up another 2% near the 32 level.

Trading comment: The pressures in the credit markets and in Europe have not lifted one bit. So it does feel like our markets are being a bit complacent relative to the troubling signals that continue to come out of the region. The SPX is holding above its uptrend line that has been in place since early October, but the trading ranges are narrowing such that traders expect a breakout soon from this narrowing range. The SPX needs to hold the 1240 level on pullbacks, while a breakout above 1265-1270 could spark additional buying and short covering.

Early Look: Data Better Than Consensus Estimates

2011-11-15T07:56:00.000-08:00

Asian markets were lower overnight, and Europe's markets saw heavy selling again. That had our futures pointing lower at the open, but the economic data that has come out has been for the most part better than expected, and that has tempered the selling in our markets.

The Nasdaq has been flirting with positive territory today, as AAPL is finally having a good day (so far). Along with tech stocks, consumer staples (XLP) are bucking the weakness so far as well.

As for the economic data, the Empire Manuf. Survey rose to 0.6 from -8.5 last month. That's a pretty big jump. Retail sales for October rose +0.5% and +0.6% ex-autos. And producer prices actually declined -0.3% in October.

Of course, all eyes remain fixed on Europe where rising bond yields and rising CDS prices point to the sustained pressure on those markets due to sovereign debt concerns. Italy's yields are back above 7.0%, and yesterday we saw CDS prices rising in France. Currently, France's benchmark bond yields 3.63%. So that's one to keep an eye on. I just saw a notable macro firm reiterating their short call on France.

The lower euro is boosting the dollar, but many commodities are higher nonetheless. Oil prices are knocking on the door of $99, while gold prices are up to $1785. Copper is also slightly higher as are silver prices.

The 10-year yield is lower today near 2.00%; and the VIX is up another +2.5% near the 32 level. So for those hoping that volatility will die down here, it doesn't look like that is in the card near-term.

Trading comment: The trading range on the S&P 500 is narrowing, which usually means some sort of breakout is coming in one direction or the other. Given that the Nasdaq has held above its 200-day average, I think the odds slightly favor a breakout in the SPX to the upside in a catch-up move with the Nazz. Predictions are hard these days with the markets being as event driven as they are. It certainly isn't a time for aggressive bets. If the SPX isn't able to hold the 1220-1225 area, I would likely become less constructive and prepare for a deeper pullback. But so far the market has been hanging in there.

long AAPL

Monday Morning Musings

2011-11-14T07:22:00.000-08:00

Not a lot in the way of market moving news this morning. Earnings reports are slowing down to a trickle, and there were no economic reports today moving markets. With that backdrop, attention falls back on Europe as the driver of sentiment.

Although Asian markets were higher overnight, Europe opened lower this morning amid concern about new leadership in Greece in Italy and whether officials will be successful in dealing with the precarious fiscal and financial conditions in the region. Italy was able to hold another bond offering, but yields there are at record highs for the euro era.

The euro is also weak, which is boosting the dollar. That is weighing on commodities with oil prices down to $97.35 and gold prices easing back near $1778.

The 10-year yield is higher this morning near 2.08%. As for the VIX, it is +5.5% higher right now back above the 30 level to 31.70. But it has been consolidating below its 50-day and does appear that it could move to lower levels if the focus could move off of Europe for more than a couple of days.

Trading comment: There are individual stories that are working in terms of stocks. I still feel that there is somewhat of a bid under the market, that will be there on pullbacks. The market has been consolidating its recent runup and I think there is a good chance that it gets resolved to the upside into year end. The ongoing risk of headlines out of Europe is something that is too difficult for anyone to handicap accurately. If things stay the same over there for the time being, investors may look past it for now. But if another shoe drops we know that selling can pick up in a hearbeat, just like it did last Wednesday. Stay nimble.

Get Mental

2011-11-11T08:28:00.000-08:00

A good discussion of market sentiment and investor psychology:

http://www.wallstreetallstars.com/psyche-diary/

Bond Yields In Italy Ease Further

2011-11-11T07:37:00.000-08:00

The market is flying in early trading on a further sigh of relief in Italy. The country's Senate passed a new austerity plan and that is being cheered in their markets. Bond yields in the country have eased back to 6.65% from as high as 7.40% earlier in the week.

This has helped Europe's stock markets rally, and has pushed the euro higher as well. With commodities taking their cue from the euro lately, most are higher on the day. Oil prices have rallied all the way up to $99, while gold prices are also higher near $1777.

In economic news, Consumer Sentiment for November (Univ. of Mich.) rose to 64.2 from 60.9 last month. That's a pretty big jump for consumer sentiment at a time when most media reports would have you believe consumer sentiment can only keep going down.

In corporate news, Disney reported better than expected EPS and its stock is nicely higher.

The S&P 500 was set to have second down week, but if today's rally holds it will end with a gain for the week. Not so for the Nasdaq, which will most likely have a second down week. AAPL continues to lag the market pretty badly which has weighed on the Nazz, but I think it will rally again into year-end.

The bond market is closed for Veteran's Day and yesterday the yield on the 10-year rose to finish at 2.05%.

As for the VIX, it is 9% lower today sitting just below the 30 level that I have been keeping an eye on.

Trading comment: I can't remember a time when the market was more driven by Europe and the euro than it is today. While sentiment in the stock market has improved this week, lots of credit gauges are still flashing caution signs. We are trying to stay balanced in our accounts. In recent weeks we have added to some stocks that have been acting better, but we also still have on some of our inverse etf hedges as the S&P 500 has yet to have a convincing close above its 200-day average for more than a day.

long AAPL, SH

Flight-to-Safety Trade Coming Off

2011-11-10T07:29:00.000-08:00

The markets are higher in early trading, though off of their opening highs. Although Asian markets got clobbered overnight, Europe is higher this morning after a successful bond auction was held in Italy.

Italy held an auction of 12-month bills which was successful although they did carry a yield above 6.0%. The yield on their longer-term notes has fallen back below the 7.0% level, which the market is breathing a small sigh of relief over as well. In Greece, a new PM has been named.

In corporate news, tech bellwether Cisco (CSCO) reported an upside surprise and the stock is nicely higher. But AAPL is lagging and weighing on the Nasdaq, which is underperforming the S&P 500 so far.

In economic news, jobless claims were better than expected falling below the key 400k level to 390,000. The trade deficit also came in lower than expected (which is a boost to GDP).

The euro is bouncing a bit, which is helping some commodities. Oil prices are higher to 96.52, but gold prices are down big back near $1741.

Gold has benefited from the flight-to-safety trade of late. So have Treasury securities, with yields moving back below 2.00% on the 10-year. But today, the flight-to-safety trade is coming off a bit with gold selling off, bonds moving lower, and the dollar under a little pressure as well.

Trading comment: The Nasdaq is heavy today with growth stocks lagging the market. Yesterday's outsized selloff was a surprise to most people, as it was certainly a delayed reaction to the rise in Italy's bond yields and the concerns over European sovereign debt. Bond yields are beginning to rise in France too, so it doesn't look like this episode is about to go away very quickly. The troika needs to step up quick with the bazooka, or markets could grow increasingly spooked. I want to be bullish here, but I can't ignore the gravity of the situation in Europe, so I am keeping things small and balanced for the time being.

long AAPL

Early Look: Delayed Reaction By The Market

2011-11-09T07:41:00.000-08:00

As the S&P 500 closed above the 200-day yesterday, I was speaking to another trader and saying that the market doesn't seem to be overly concerned with the spiking Italian yields. His answer was that the market always has a delayed reaction and then wham! Prescient comments as today it looks like investors can no longer ignore spiking Italian yields.

Bond yields in Italy have surged above 7.40% today, a level many strategists cite as the market indicating dwindling confidence with the ability of leaders to get their arms around the financial conditions in the country. Italy is far bigger than Greece, so this is a different story now.

Asian markets were actually higher overnight as China's latest CPI reading cooled to 5.5% from 6.1% last month. That led to a rally across the board in Asian markets, but the enthusiasm did not spill over into this morning's market.

On the earnings front, disappointing reaction in GM. Also PSMT (the Costco of Latin America). On the positive side is SODA, which is bucking today's weakness.

The dollar is higher as the euro is getting hit. This is weighing on most commodities. Oil prices are down near $96, while gold prices are only off slightly to $1795.

The 10-year yield has plunged back below the 2.0% level, now at 1.96%. And the VIX, after closing nicely below that 30 level yesterday, is surging +15% back to 31.65.

Trading comment: The surge in yields in Italy, and most of Europe in general, is very troubling. Italy is much bigger than the other countries involved, and the EFSF has nowhere near the firepower currently to tackle the problem itself. I have been saying that I felt portfolio managers were in dip buying mode, unless there was another shoe to drop in Europe. I'm not sure yet if this warning sign is big enough to change the equation. We will have to see how the EU officials step up their response to this latest development and if it calms the markets. Until then, continue to manage risk closely and resist the temptation to make any outsized bets.

Italy's PM Hangs On By A Thread

2011-11-08T07:48:00.000-08:00

Funny action in Italy this morning. The European markets were higher this morning on the rumors that Italy's PM might lose his post. When the news came out that he won the vote, the markets sold off. Not much of a vote of confidence for Berlusconi, who lost the majority vote within his party. Italian yields continue to hover near the 6.7% range which is uncomfortable territory for the market.

Our markets are still higher, but not as much as they were in early trading. A handful of earnings reports have continued to roll in, but they are mostly secondary names. One standout was Priceline (PCLN), which topped estimates and gave conservative guidance. The Street is acting like management is lowballing the guidance and has bid the stock up +5% today above $535.

Financials are leading the early action, while consumer discretionary stocks are lagging. Weekly retail sales were positive at +3.1% but that is lower than recent figures.

The dollar is slightly lower, which is helping most commodities. Oil prices are higher near $96, while gold prices are flat right now around $1791.

The 10-year yield is struggling to stay above its 50-day average, and is currently trading at 2.01%. As for the VIX, the battle at 30 continues. The VIX had broken below that level earlier, but has since reversed higher at is just below that key level. I'm keeping an eye on the VIX.

Trading comment: The chart below shows how the S&P 500 rallied right up to its overhead 200-day average this morning. But this is key resistance and it might take a little longer to build up the momentum to break through it convincingly. I expect the SPX to consolidate its recent gains a little more before eventually breaking above this key moving average. I also would expect a close above those levels to attract some additional buying interest and short covering among technicians (which most hedgies are). In the meantime, more growth stocks are acting better. Names we have added to recently include: TSCO, SCSS, and ULTA.

long PCLN, TSCO, SCSS, ULTA

Monday Morning Musings

2011-11-07T07:25:00.000-08:00

The malaise remains the same this morning, with all eyes on Europe while corporate news reports in the U.S. take a back seat to the drama across the pond. Greece's prime minister has stepped down, so now the country has to deal with political restructuring at the same time its financial and economic conditions are in trouble.

There are also rumors now swirling that Italy's prime minister is considering a resignation. All of this helped push Asian markets lower overnight and European bourses in the red this morning.

Commodities are mixed, with copper lower and oil and gold higher. Oil prices have risen to $94.90, which seems odd in the face of all of the economic concern but there are also fears of escalating tensions between Israel and Iran. Gold prices are also higher near $1780.

The 10-year yield is moving back below its 50-day average to 2.03%; and the VIX is still above that 30 level I keep mentioning, up 4% today to 31.45 right now.

Trading comment: It's very difficult to figure out which days the European backdrop will take center stage with investors versus when the market seems to focus more on company fundamentals. Of the two, I think the former is harder to forecast, so I fall back on focusing on those companies that are still growing nicely and executing well despite the lumpy economy. Ultimately share prices should follow earnings growth higher, even as the multiple we pay for those earnings fluctuates with the sentiment yo-yo.

Italian Bond Yields Front And Center

2011-11-04T08:13:00.000-07:00

The market is lower in early trading on some softer economic data as well as continued concerns out of Europe. The Greek PM faces his vote of confidence today, and there has been rumors out of the G20 meeting that members are not all on the same page in terms of IMF resources and potential role in the bailout.

While Greece has been front and center, Italian bond yields have continue to rise, and I believe they are not at the highest levels since the creation of the euro. Italy is a much bigger problem in terms of the size of its debt relative to Greece, so it is normal that this would unnerve the markets. Hopefully the ECB and IMF act quickly. Also, one thing Italy has going for it is that it funds a lot of its debt internally and rising yields may entire domestic buyers.

In economic news, the monthly jobs report showed the economy added 80,000 payrolls. That figure was slightly less than the 85k consensus, but the revisions to both the September and August figures were revised nicely higher with a net +102k jobs added to the prior figures. Also, the unemployment rate ticked lower to 9.0%.

In corporate news, Groupon (GRPN) priced its IPO a little above the expected range at $20. Last I saw it was trading near $27. That's a great first day showing, but I am not too positive on the long-term fundamentals for this company.

Asian markets were higher overnight; the 10-year yield is lower to 2.03%; and the VIX is +5% higher at 32.10.

Trading comment: Tough juncture. I think investors are getting their arms around the European problems and trying to price it in. But the possibility of Italy flaring up would be another shoe to drop. The VIX stubbornly above 30 means that angst is still elevated, and the pu/call ratio has been above 1.0 for a long time now. That said, I still think dips can be bought as a bid should surface under the market for the near-future. I'm watching SPX 1220-1225 to start legging in.

Draghi Starts ECB Off With A Rate Cut

2011-11-03T08:02:00.000-07:00

The market is higher in early trading after a surprise rate cut by the ECB. In Mario Draghi's first ECB meeting after taking over from Trichet, the ECB trimmed rates 25 basis points to 1.25%. This has helped boost European markets, and even boost the euro a bit which is odd when you're cutting interest rates.

Pressure has continued to grow on Greece to abandon its referendum, which it looks likely that they will. But Greece's PM may have lost favor among party members and the vote of confidence later this week could prompt a change in leadership. The situation in Greece remains fluid.

In economic news here, the ISM Services Index came in a little below expectations at 52.9, but still above the 50 level that marks the line between expansion and contraction.

In corporate news, there were a few more earnings reports to trickle in, but there was also the same-store sales reports for retailers today that it driving some big moves in retail stocks. ANF is getting hit pretty hard. On the earnings plus side, see: ANR, QCOM, VRX, ATK. On the downside are K and RIG to highlight a couple.

Commodities are mostly higher again, with oil prices rising to $93.50 and gold prices topping $1765. Judging by the ETFs, copper looks lower today while silver is a tad higher.

The 10-year yield is a touch higher to 2.05%; and despite the gains this morning the VIX has remained stubbornly in positive territory hugging the 33 level.

Trading comment: No real change to my recent comments on the short-term outlook. The SPX still needs to get above its 200-day before real stock chasing begins. That key moving average is currently sitting near 1275. But the market could digest its recent run-up for a bit longer before staging another stab at higher levels. Greece and Europe remain a wildcard, but the longer it drags on the more likely it is that the market has simply priced it in and investors need to look beyond the current scenario. We are in the seasonally strongest part of the year for the market, and I still expect upcoming dips to be bought.

long SLV, VRX

Follow The Bouncing Euro

2011-11-02T08:09:00.000-07:00

The market is getting a nice bounce in early trading after some very heave selling the last 2 days. Although we have had fairly good economic data and continued positive earnings reports, market sentiment continues to be driven by the latest headlines out of Europe.

You can pretty much tell which way the market is going by following the euro itself. Yesterday, the drama about a referendum in Greece unnerved the markets. It looks as of now like the referendum will indeed take place, but the situation is fluid and could change at any time. Go figure. The Greek sideshow is really stealing the spotlight from the real concern, which is rising yields and debt loads in Italy.

We also have the FOMC making its statement later today, and comments from Bernanke. I don't think he'll change his tune all that much. Recent economic data hasn't been that bad. If anything, I think he'll hint at the Fed standing ready to use additional policy tools if conditions deteriorate.

In corporate news, there was a raft of better than expected earnings reports last night and this morning, including: MA, CTSH, JDSU, CLX, CLH, WCG, and CF to name a few.

In economic news, the ADP Employment report came in above expectations at +110,000 payrolls added in October. This report doesn't always correlate to Fridays govt. jobs report, but hopefully it is hinting at a positive report.

The lower dollar is helping commodities. Gold is back near $1750, oil prices are above $93, and copper and silver prices are higher as well.

The 10-year yield is higher to 2.04%; and the VIX is down -6% currently to 32.59. The VIX has broken below its 50-day average, but is still above that key psychological 30 level that traders watch.

Trading comment: The market seems to have these 2-day pullbacks but then buyers step back in. I still think that many folks will be in dip buying mode into year-end, barring another big shoe to drop out of Europe. But earnings reports continue to come in strong, and economic data is not deteriorating at the moment. So that is a backdrop in which stocks should be able to make some headway and more leading growth stocks should start to surface.

long CLX, CTSH

Debt Concerns Flaring Up In Italy

2011-11-01T07:46:00.000-07:00

The market is down sharply again in early trading. After breathing a huge sigh of relief last week after the news of Europe's bailout plan was announced, investors seem to be back in sell mode in Europe after Greece says it may seek a referendum on the recent plan. Also, bond yields in Italy have been spiking higher this week indicating continued concerns about conditions there.

All of the above has led to sharp selling in the European bounces (down 3-4%) which has also spread to U.S. markets this morning. Asian markets were lower overnight as well.

In economic news, the ISM Manufacturing Index for October came in below expectations at 50.8, which is also below last month's reading of 51.6. China's PMI reading was also disappointing at 50.4 (from 51.2).

The euro is lower today while the dollar is higher. This is weighing on commodities, with oil prices down to $91.25 and gold prices testing the $1700 levels (currently $1711).

Treasuries are the only thing rising this morning, with the yield on the 10-year back near that 2.0% level. As for the VIX, it is seeing a huge spike this morning up nearly 16% right now back to 34.50.

Trading comment: While the last 2 days have seen a renewed flare-up in Europe, I don't think the wheels are coming back off that quick. October saw an enormous outized rally, and its normal to see some pullback, even if it is sharper that most would like. That doesn't negate the fact that many PMs remain underinvested and will be back in dip buying mode as we head into the final 2 months of the year. The S&P 500 has fallen back to support levels around 1225-1230, an area that had been acting as resistance during the last few months. Let's see if things can calm down and entice buyers to step up.

Monday Morning Musings

2011-10-31T07:39:00.000-07:00

The market is lower this morning after some reverberations spreading through the market after MF Global has moved into a bankruptcy filing. It looks like the trading firm took on some big sovereign debt risks that ultimately turned out bad. Whenever a financial firm is liquidated it can rattle the market, but this should in no way be compared to what happened to Lehman Bros.

In foreign markets, officials in Japan have intervened in the Yen to try to push the currently lower after its recent runup to multi-decade highs. The lower yen is boosting the dollar and weighing on commodity markets. Oil prices are lower near $92.15 and gold prices are also down to $1725.

Earnings season will begin to slow this week, but it was another good showing for corporate profits. It will be interesting to see how 2012 estimates are adjusted in the coming weeks after forward guidance seems to have come in better than many analysts were bracing for.

The 10-year yield is lower to 2.21% after reaching as high as 2.40% last week; as for the VIX, it is +11% higher right now to 27.25, but still nicely below that 30 level.

Trading comment: After last week's outsized rally, capping off an enormous month for the markets, some profit taking today is not surprising. The chart below shows that the S&P 500 rallied all the way up to its overhead 200-day moving average, which is a natural area of resistance. This should be a battleground in the near-term. I would expect there to be some consolidation around this level for a bit. But if the market is able to get back above it, that would continue to put pressure on investors to put risk back on and chase stocks higher.

Do You Believe The European Solution Will Work?

2011-10-27T07:50:00.000-07:00

The markets are flying this morning on the news that the EU leaders have agreed to a plan to deal with the debt crisis in the region. Although this deal was for the most part well telegraphed by the market, I think there was still some skepticism that the various parties would agree on all of the various pieces.

As it has been announced, the negotiations on the Greek debt agreed on a 50% haircut, the EFSF stability fund is planned to be able to leverage up to $1.4 trillion, and the banks in Europe will be recapitalized. Of course, there is a lot of skepticism as to how the whole thing will actually be implemented and if it will work long-term, but those aren't today's issues.

Financials here in the U.S. are leading the early action, with the sector fully 4% higher, as the concerns about exposure to European banks dissipates. Corporate earnings have continued to come in better than expected, and investment managers seem to be scrambling to cover short positions and add long exposure as performance anxiety sets in.

Additionally, Q3 GDP came in above expectations at +2.5%. That is both well above last quarter's figure and also makes the debate about recession more of a 2012 issue as opposed to the imminent economic collapse some where predicting.

Asian markets were up sharply overnight, and Europe is nicely higher this morning. It is also a good sign to see CDS prices dropping in Europe. The euro is also higher vs. the dollar, which is boosting commodities. Oil prices are all the way up near $93, gold is up a bit to $1727, and silver and copper are rallying nicely as well.

The 10-year yield has broken above its recent trading range and is at 2.29%; as for the VIX, it fell all the way down to the 25 level, and is currently -13% lower on the day to 25.92.

Trading comment: I admit it hurts not having more long exposure during this record rally we have seen since the Oct. 4th lows. I am glad we didn't press our shorts or add to hedges as we felt a bounce was certainly in order after investor sentiment had reached bearish extremes. The question is what to do now? With earnings holding up, the economy slow but steady, and Europe less bad now that plans are in place, I think everyone will be in dip buying mode. I want to look for stocks that reported good earnings and can play catch-up with the averages, as well as looking for new leadership. The SPX is at resistance at its overhead 200-day average near 1275, so I do expect some consolidation in the markets first, but probably not all that much.

Is Recession Being Priced Off The Table?

2011-10-26T08:11:00.000-07:00

The market opened higher this morning, but quickly turned tail and traded into negative territory. Earnings reports have been mostly positive, with a few negative reactions in the associated stocks. And optimism still seems somewhat lofty that EU leaders will emerge from this summit with some concrete solutions.

In economic news, durable goods for September slid 0.8%, but actually rose +1.7% ex-transportation. That's a fairly good number. Also, new home sales for September also rose more than expected by 5.7%. Recent economic data has not been nearly as soft as the market had been expecting, and it seems that a few weeks ago recession was being fully priced into this market but now is definitely coming into question and at least partly explains the lift we have seen in stock prices.

In earnings news, we are seeing positive action in names like PNRA, ESRX, FFIV, and MHS to name a few. Negative reactions include AGN, LMT, F, and of course AMZN which missed its numbers and is taking it on the chin.

We should hear this morning from EU leaders about the details of their summit. The market is expecting something near a 50% haircut on Greek debt, and word that the EFSF bailout fund can be leveraged up somehow to at least $1 trillion. I don't think we are going to get a firm figure on the size of bank recapitalizations. Investors have been saying that the bank recap figure needs to exceed $100 billion. So depending on how much details we get, we will see if sentiment in the market has become too bullish. I would also not be surprised to see them say that more details will be given in November ahead of the G20 meeting.

The euro is higher today at the expense of the dollar. Commodities are mixed. Oil prices are lower near $91.20, while gold prices have broken out over the $1700 level and are currently around $1718.

The 10-year yield is slightly higher to 2.13%; and the VIX is also higher and still stubbornly above that 30 level (currently 32.68). We still need to see this come down.

Trading comment: Tough juncture as we are somewhat held hostage to political decisions out of Europe. But with solid earnings reports coming in, and economic data this isn't as bad as feared, I still feel like underinvested portfolio managers will look to put money to work and buy dips in the near-term. Barring another shoe to drop in Europe, I would look to add to those stocks that recently reported good earnings and are beginning to break out.

long ESRX, MHS, PNRA

Earnings Reactions A Mixed Bag Today

2011-10-25T07:55:00.000-07:00

The market is lower in early trading, which shouldn't be much of a surprise given the outsized rally we have seen since the early October lows. There are reports coming out now that leaders in Europe are having some difficulty agreeing on some components of the proposed plan, and we are supposed to hear tomorrow what they have come up with.

Earnings reports continue to roll in, and the reactions in stocks have been a mixed bag this morning.

On the positive side, stocks that are seeing a bounce include: NUS, NOV, COH, BP, UA, COLM, and ILMN.

On the negative side, stocks dropping on earnings reports include: ITW, X, UPS, DB, TROW, CMI, X, and the poster child NFLX. But the most talked about downside guidance is coming from MMM which expects slower growth in 2012 and talked about specific weakness in Europe.

In economic news, the Consumer Confidence number for October dropped more than expected (no surprise) to 39.8 from 45.4 in the prior month. Also, the Case-Shiller Housing Price Index fell -3.8% in August.

Commodities continue to rally, with oil prices now all the way back to $94, and gold inching higher to $1685.

The 10-year yield has eased back to 2.16%; and the VIX has bounced 5% back above the 30 level to 30.75 currently. This is still an elevated level, and really needs to get back down into the 20s before we can expect a noticeable drop in the big market swings of late.

Trading comment: Investors are certainly feeling better after the last week of up days in the market. I sense that a lot of portfolio managers remain underinvested, and will be looking to add to stocks on a pullback. The wildcard of course is that we are still being held hostage to political decisions coming out of Europe about how they are dealing with this debt crisis. But unless there is another big shoe to drop in Europe, I think the market has pretty much priced in a lot of the issues for the near-term, and a continued unwind of investor pessimism should provide some support to the market.

Monday Morning Musings

2011-10-24T08:37:00.000-07:00

Asian markets surged overnight on optimism that European officials are getting serious enough to come up with large sums aimed at stemming the debt crisis. No official details have been released yet, and there is another meeting taking place this week. But the market seems to be breathing a sigh of relief that they have again successfully kicked the can down the road.

Europe isn't up as much as I would have thought, but is still higher on the day. Economic data there was slightly weak in terms of PMI manufacturing and services readings that were lower in October than September, and also below the key 50 level marking contraction.

Caterpillar (CAT) released better-than-expected earnings this morning, and its stock is up nicely. There were also some M&A items with Cigna (CI) purchasing HealthSpring (HS) and Oracle (ORCL) buying RightNow Tech (RNOW), both for healthy premiums. All sectors are higher so far, led by consumer discretionary and industrials.

The dollar is slightly lower and most commodities are higher. Oil prices are up near $89.90, and gold prices are higher to $1565. Copper is also surging for a second day, up 7% currently.

The 10-year yield is higher to 2.21%; and the VIX is back below the 30 level, down -5% today to 29.66.

Trading comment: The market is overbought short-term, but you have to wonder how much performance anxiety is setting in given how much the markets have rallied since their early October lows. Stories abound that hedge funds are very underweight equities, and you could easily see that push stocks higher as managers chase performance. I know how they feel. Those index etf hedges we own are beginning to be a drag on portfolios, and we will need to reassess their usefulness soon.

Optimism Running High In Europe Ahead of Big Weekend

2011-10-21T08:12:00.000-07:00

The market rallied right at the open after European markets showed signs of optimism that this weekend's European Summit would provide some answers to the debt crisis in the region. There hasn't really been any new comments. In fact, there was a headline that the "situation in Greece has taken a turn for the worse". One has to wonder if expectations have gotten ahead of themselves.

The enthusiasm sure didn't show up in Shanghai overnight. China's market was down for a 5th straight session, and fell to a fresh 2.5-year low. Don't they know the troika is about to solve all our problems?

Earnings reports have been mostly positive also last night and this morning. On the positive side are CMG, MCD (new all-time high), SNDK, and COF. On the negative side is APKT. And on the side of just okay, but not big reactions are SLB, VZ, MSFT, and GE.

The dollar is lower today and commodities are bouncing back. Copper is surging +5%, oil prices are above $88, and gold is higher near $1636.

The 10-year yield is back to the 2.20% level; and the VIX is down -7% this morning, but still at very elevated levels at 32.31.

Trading comment: Some of today's positive open may have been exacerbated by options expiration today. But technically, the S&P 500 has broken above its 8/31 highs at 1230. So for now we have broken out of the trading range to the upside. This is a good sign, but with the market up for nearly 4 weeks straight I think we could get a little pullback next week. Of course, a LOT depends on the news out of Europe. There is a summit over the weekend, and I believe a second summit around Wednesday. We could be setting up for a 'buy the rumor, sell the news' type of reaction also. Overall, if you're looking at adding to longs I think you can wait for a pullback.

long MCD, SH

Wall Street All-Stars

2011-10-20T12:32:00.001-07:00

I'm going to give all my Facebook friends and twitter followers a free six month subscription to WallStreetAllStars.com. Simply go sign up on http://www.WallStreetAllStars.com/ and then shoot an email letting us know you subscribed to support@wallstreetallstars.com and we'll rebate you the $49 monthly fee each and every month for the first six months -- that's worth $300.

The European See-Saw

2011-10-20T08:13:00.000-07:00

The market has been up recently on hopes that EU officials are getting their act together to move in a cohesive way and tackle the sovereign debt issues. Now we are getting some news blurbs that officials are having difficulty holding discussions on the EFSF and that there will be no decision on leveraging the fund this weekend.

The disappointment out of Europe seems to be trumping the positive economic reports from this morning like the big improvement in the Philly Fed Index to 8.7 from -17.5 last month. That's a big improvement, and will embolden calls that we are not going to experience a recession. I still think the odds are 50/50.

In earnings news, a few disappointing reactions in the likes of AXP, EBAY, and WYNN. On the positive side, see RVBD and PM.

The dollar is roughly flat today, but most commodities are lower. Oil prices have pulled back to $85.60, and gold prices are lower near $1617. Copper prices are plunging today as well.

The 10-year yield is hovering near 2.14%, and has been steadier in recent days than it has been in weeks. As for the VIX, it continues to climb and is now +6% higher back to 36.43. It is just above its 50-day overhead resistance, so this is an interesting juncture to watch.

Trading comment: The SPX is still holding above the 1200 level, which is short-term support (1190-1200). Bulls are hoping that we can continue to build a base around these levels before a successful push through SPX 1230. A break of SPX 1190 would likely spell another trip to lower levels of the recent trading range. Tough to gauge, as the market is very news driven by each headline out of Europe. We are staying defensive and maintaining our etf hedges.

long SH, PM

Earnings Reports Mostly Positive

2011-10-19T07:52:00.000-07:00

The market is mixed in early trading, with Apple's results weighing on the Nasdaq, but the other major indexes pulling into positive territory.

AAPL dipped below the $400 level this morning, but is holding above there as of this post. The company missed EPS estimates for the first time since 2004. But they also raised guidance for next quarter, which is an equally rare occurrence for the company. And despite the weak iPhone number, gross margins were very solid.

I think for a company that has executed as flawlessly as Apple, investors should be willing to give them the benefit of the doubt and see if it was just a one-quarter blip. I expect them to have a very strong fall quarter, and am not selling any of our shares at this juncture.

Other strong stock reactions to earnings reports include ISRG, INTC, and ABT to name a few. Despite a few outliers, I think the net reactions to earnings season thus far have been fairly positive and I'm interested to see how S&P profit projections hold up once we get through the rest of the reports.

Asian markets were higher overnight, and Europe is higher this morning. The tone in Europe is improved despite Moody's downgrading Spain's debt rating. This wasn't a big surprise, but it is interesting to see that CDS spreads in Europe are improved today.

The dollar is flattish today, and commodities are mixed. Oil prices are higher again to $89.40 and gold prices are up slightly near $1657.

The 10-year yield is higher this morning near 2.18%; and the VIX remains interesting in that it cannot get below that 30 level folks are watching. Today it is actually higher to 32.66. Those sustained elevated levels in the VIX mean that traders are still expecting more swings in the market.

Trading comment: The market recouped Friday's losses yesterday and then some. The price action certainly feels good, and the indexes have indeed held above their 50-day averages thus far. Earnings season remains a wild card for individual stocks, but those companies that report good earnings I think can be bought for more upside in Q4. The market may be overbought in the short-term, but there is still considerable bearish sentiment that has built up and could help offer support under this market.

long AAPL

Monday Morning Musings

2011-10-17T07:28:00.000-07:00

The markets are lower in early trading following last week's outsized 6% rally. That was the best weekly showing in more than two years. So it's normal to see a pullback following such strong price action. What the bulls hope for is just some quiet consolidation, without too much distribution.

Earnings season continues to heat up. This morning Citi (C) and Wells Fargo (WFC) both reported earnings, with the former beating estimates but the latter coming up a little shy. WFC is down 5% on its miss, and weighing on the financial sector. Halliburton (HAL) also beat estimates, but it looks like some serious profit taking there after a nice run into its earnings report. Apple (AAPL) reports this week, and is breaking out to new all-time highs ahead of its report.

Asian markets were higher overnight, and Europe was higher this morning after a G20 meeting this weekend. Leaders were pressed to come up with some sort of resolution within a week. I'm glad to see they're getting serious, but I am a little wary that expectations may be getting ahead of themselves.

The dollar is higher this morning, while commodities are mixed. Oil prices have eased back slightly to $86.40, while gold prices are firm near $1686.

The 10-year is lower today at 2.18%; and the VIX has really spiked higher already this morning, up nearly 13% back to the 31.85 level. This is an interesting development after last week's drop in the VIX below the 30 level. I think it shows traders are still jittery.

Trading comment: This is a tough juncture to consider new long positions right here. First you have the big rally from last week that will likely see some consolidation at the least, as well as profit taking. You also have earnings reports to deal with. And the action in WFC and HAL show the action following earnings reports can be unpredictable. That said, I expect AAPL to have a positive reaction to what I think will be very strong earnings again.

long AAPL, HAL, WFC

Financials Lag Early Rally

2011-10-14T08:30:00.000-07:00

The markets are higher again in early trading on the heels of improved sentiment in Europe and a blowout earnings report from Google (GOOG).

Treasury Secretary Geithner made a lot of comments about Europe and tried to instill some confidence. He said they will continue to pressure Euro leaders to act decisively, and also said that the IMF has considerable resources that have yet to be deployed. That hints at his relationship with Christine Lagard, who is in Geithner's camp that more needs to be done.

The positive action in Europe this morning bucked the weakness in Asian markets overnight, and also ignored the downgrade of Spanish debt by Fitch.

In the U.S., stocks are rallying following Europe strength and the strong results from GOOG. Additionally, the retail sales report from September came in stronger-than-expected at +1.1%.

The financials are the biggest laggards this morning after Fitch placed several large financials on its Negative Watch list.

The dollar is weaker so far as the euro bounces, which is boosting commodities. Oil prices are higher to $86.40, while gold prices are trying to lift above $1675.

The 10-year yield continues to bounce, now back to 2.25%. And lo and behold but the VIX has finally broken below that psychological 30 level, although just barely. It is currently trading near 29.80 after getting as low as 28.25 after the open.

Trading comment: The price action has been solid all week, but the leadership in the market is lagging. I just don't see a lot of quality growth stocks breaking out. So I have yet to get a lot more bullish, and at this point am still in the camp that this is an oversold market rally that is normal after seeing investor sentiment reach extreme bearish levels. I could be wrong, but it would take continued constructive action in the market combined with some real tangible solutions out of Europe that I have yet to see. At this point there is a lot more talk than action going on across the pond.

long GOOG, SKF

Market Overbought And At Resistance

2011-10-13T08:20:00.000-07:00

The market is lower in early trading after a very nice rally. People often like to look at how much the market bounced from its recent lows. The SPX traded down to 1075 last week and bounced as high as 1220. That makes for a solid 13% bounce. Although if you were good enough to buy those lows and sold the highs yesterday, I have a job for you at our shop.

Bulls were hoping for some good news from JPM this morning, and they were able to top consensus estimates. But the cautious tone from management is not helping the stock, which is currently -5% lower and weighing on the financial sector which is the biggest laggard this morning.

Tech is bucking the weakness and the NDX is just barely positive as of this post. Google (GOOG) shares are higher going into tonight's earnings report. I'm sure GOOG will be able to post a little upside, but the stock reaction will be any ones guess. Also, GOOG management sometimes spends money on non-core things, so we will have to see how tight they were with their expenses. That's one thing that bothers me a bit about their management.

Asian markets were higher overnight, but Europe is down this morning. The euro is also lower while the dollar is higher. That is weighing on the commodity index. Oil prices have fallen back to $84, while gold prices are also lower around $1661.

The 10-year yield got a big bounce yesterday, but is giving some back today trading near 2.15%. As for the VIX, it almost got below the 30 level yesterday, but then bounced higher and is currently up +4% today to 32.54.

Trading comment: After being up big the last 6 out of 7 days, the market is short-term overbought and in need of at least some consolidation. Also, the major indexes have run into their former resistance levels near SPX 1220 and Nazz 2600. For the bulls, two things need to occur from here. The indexes need to hold above their 50-day averages, and these major support levels need to be broken. That could signal more upside is possible. But don't forget the list of stocks breaking out is not exactly bountiful. It is mostly utilities and defensive type stocks, not your typical quality growth names. So take the constructive action with a grain of salt, imo.

long GOOG, JPM

Earnings Season Starts On A Positive Note

2011-10-12T08:19:00.001-07:00

The markets are higher again in early trading. If the market closes positive today, it would be the 6th day of gains in the last 7 sessions. For its part, the S&P 500 is running into resistance levels around the 1220 area that have halted the last few rallies.

Asia was mixed overnight, with some floods in Thailand that closed factories. But China was able to bounce +3.1%. Europe is higher this morning on optimism that Slovakia will pass the EFSF plan after it was voted down yesterday.

The euro is also getting a bounce on the news, pressuring the dollar. Commodities are higher across the board, led by copper (+3.5%). Gold prices are rallying back to $1680, while oil prices are roughly flat near $85.75.

In earnings news, although Alcoa (AA) reported a miss its stock is only down slightly. But Pepsico (PEP) and Infosys (INFY) both reported solid results and their stocks are up nicely. INFY's earnings is also boosting one of our holdings that I like best in the space, Cognizant Tech (CTSH). From this point, earnings season will continue to heat up, but at least its getting off to a solid start.

The 10-year yield is also getting a nice lift higher as recession fears are moving to the back burner, at least for the time being. Today the yield is all the way back to 2.21%.

As for the VIX, it is down -7.7% currently and knocking on the door - or I should say the floor - of that 30 level that I have been talking about. A break below this level would be a good sign for the bulls.

Trading comment: With the market rallying 6 of the last 7 days, we are no longer oversold and are short-term overbought. So I don't want to chase anything here, and I think it is likely we will see some consolidation in the near-term. The key for the major indexes will be that they hold their 50-day averages on any pullback. Those 50-day averages have been acting as resistance for the last few months, and if we can convert that resistance into support it would be another bullish sign for the market.

long CTSH

Bond Yields Lift From Very Low Levels

2011-10-11T08:02:00.000-07:00

The market opened under a bit of profit taking this morning, but has reversed its early losses and is trading higher for the time being.

Asian markets joined the party and rallied overnight, led by Hong Kong. Interestingly, China lagged again and was only able to muster a 0.1% gain. Europe is lower this morning after a decision by the Troika to give Greece its next tranche of aid. Investors in the region feel that this will do little fix the longer-term problems of the country. As for news, we are waiting to here if the EFSF is ratified in Slovakia which is voting on it now.

Our financial sector is awaiting details from the Volker Rule, which is currently under a comment period. Banks stocks are mostly higher today, although tech stocks are leading the early action.

The dollar is getting a little bounce this morning, while most commodities are lower. Oil prices are down near $85.10, and gold prices are slightly lower to $1667.

The VIX isn't falling today, and is hovering near the 33.25 level. Yesterday it broke below its 50-day average for the first time in months, which is a good sign. But I would have thought if traders really think the market has more upside in store that it would have moved even lower. I would like to see it get below the 30 level to signal an expected decrease in all of this volatility that we have seen.

As for the 10-year yield, the bond market was closed yesterday but yields are on the rise today. You can see below that the yield on the 10-yr. is breaking above its 50-day average. While higher bond yields are not theoretically good for the market, I like to see the 10-yr lift a little from its recent depressing levels simply to signify that the economy isn't about to fall off a cliff.

Trading comment: We sold some of our trading index shorts yesterday as the market appeared to break out of its slump. Investor sentiment has become extremely bearish, with many of the indicators we follow at levels not seen since 2008. Even though I don't think we have seen the ultimate lows in the market for this cycle, I am aware of the fact that there can be interim trading rallies along the way. If we don't get hit with further unexpected bad news out of Europe, and no big earnings disappointments, I could see this market continue to lift a little higher while some of the recent bearish sentiment gets unwound. Stick and move, baby.

Monday Morning Musings

2011-10-10T07:58:00.001-07:00

After a 2% weekly gain last week, the markets are up sharply in early trading this morning. The news over the weekend was that both Merkel and Sarkozy have committed to supporting the region's banking system through some sort of recapitalization plan to be unveiled in a few weeks.

Although Asia's markets were roughly flat overnight, Europe is rallying this morning. The euro is also getting a boost at the expense of the dollar. China was closed all last week for holidays and re-opened with a -0.6% loss last night.

Commodities are rallying, with gold prices higher to $1667 and oil prices up near $86.

All 10 S&P sectors are higher today, led by energy and financials. Defensive sectors like consumer staples and utilities are lagging.

The bond market is closed for Columbus Day today.

Trading comment: A notable development on the technical front is the S&P 500 breaking above its overhead 50-day average for the first time since July. Lots of traders like to lean short on stocks when the market is below this key moving average. While one day doesn't necessarily change the trend, it is a good start. And a couple consecutive closes above the 50-day could spur additional short-covering. The SPX has been down for 5 straight months, so a relief rally certainly isn't out of the question.

Earnings season will start to pick up soon, and will be a key ingredient. Stocks have already priced in a lot of negativity, and in my opinion have priced in a decline in corporate profits going forward. If we can get some solid reports and forward guidance from managements that is less bearish than many already fear, I think that could be enough to add to this nascent rally.

still long SH

No Rate Cut From The ECB

2011-10-06T08:12:00.000-07:00

Despite the hopes in the market that the ECB would cut rates as his last measure before leaving office, ECB President Trichet held rates steady at 1.50%, well above our fed funds rate here in the U.S. Trichet said that this rate remains appropriate, but that the ECB would conduct two longer-term lending programs. He also added that countries should move to recapitalize their banks.

As for the Bank of England, they too held rates at 0.50%, but increased their asset purchase program by an additional 75 billion pounds. The European markets rallied this morning, and helped improve sentiment before the open here in the US. Asian markets also rallied overnight, led by a +5.7% surge in Hong Kong.

In corporate news, we saw a wave of same-store sales reports by retailers this morning, and most of the stocks in the group are trading higher. The retail etf (XRT) is up +1.4% after an hour of trading so far today.

The dollar is lower today, helping to boost commodities. Oil prices are higher near $80.50, while gold prices are up a tad to $1645.

The 10-year is getting a nice bounce to 1.95%, despite Operation Twist. And the VIX is down another percent to 37.20. A test of its 50-day support is coming very soon. The VIX has not traded below its 50-day average since July 22nd, so this would be a notable event if it occurred.

Trading comment: The market is enjoying a third day of a bounce from its spike down to new lows on Monday. Tomorrow is the big monthly jobs report, which often adds to volatility in the market. I am considering adding back to our index hedges that we took profits on last week. While this bounce has been nice, it is still too early to declare that the market trend has changed from down to up. That could still happen in the near-term, but I think we would need to see some more consolidation and constructive action first.

Is Europe Considering "Le-TARP"?

2011-10-05T08:06:00.000-07:00

The markets started out down a bit, but have since rallied back into positive territory. Yesterday's late day rally was quite impressive, and if the bulls can hold the line here, we could see additional short-covering add to those gains.

Although Asian markets were mixed overnight, Europe has rallied strongly this morning. The improved tone in Europe comes amid chatter that officials are considering ways to recapitalize the banks in the region. Le-TARP, anyone?

Last night, Moody's downgraded the debt rating for Italy, but it appears that this move was already baked in the cake.

In economic news, this morning's ADP Employment report showed that private payrolls increased by 91,000 in September, far better than the 45,000 consensus estimate. Also, the ISM Services index for September came in at 53.0, which is just slightly below August's reading of 53.3. The reading above 50 still represents expansion for the sector.

Commodities are mostly higher today, except for precious metals. Oil has rallied back to $78.50, while gold prices are just slightly down near $1614.

The 10-year yield is getting a boost to 1.88%; and the VIX has continued to mover lower after a dramatic reversal yesterday. The VIX is down another -4% today to 39.20, which is still a very high level but not as dramatic as the 45-46 readings experienced yesterday.

Trading comment: Yesterday we took profits on some of our index etf hedges, but we have not gone so far as to add to our long positions as of yet. I would like to see the market hold some support levels and prove that yesterday wasn't just a one-day wonder. The market remains heavily oversold, with recent bearish sentiment indicators at extreme levels. This does provide a good setup for a continuation rally, but sentiment readings are secondary indicators. We need to see strong price/volume action as our primary indicator.

Groundhog Day or Turnaround Tuesday?

2011-10-04T08:27:00.000-07:00

The market is lower again in early trading on no new news, but rather a continuation of concerns out of Europe. It feels like Groundhog Day, with each day playing out surrounding the same news event. Speculation over a Greek default remains high and eurozone officials have said that they will delay disbursement of aid to Greece.

There is no real economic or corporate news this morning to account for the amount of selling pressure we saw in the first hour. Some of it is technical selling after the SPX broke below the 1100 support level that has held since early August.

Asian markets were lower overnight, and Europe is down again today as well. Commodities are also lower, with oil prices down near $77.20 and gold prices lower to $1640.

The 10-year yield was lower in the first hour but has since bounced a tad to 1.80%. Ditto for the VIX which opened higher but has since reversed into the red to a still high 44.72.

Trading comment: Today could either be another groundhog day or it could be a 'turnaround tuesday'. The Russell 2000 was the first index to buck the selling and go green. Then the Nasdaq followed suit and turned positive. As yet, the S&P is still struggling to get out of negative territory. With the market down quite a bit in the last 4 days, we have taken partial profit on one of our index etf hedges. Sentiment is hitting extreme bearish levels, and a bounce seems likely in the near-term. While we are still positioned defensively, we like to trade around our hedges from time to time.

less long RWM

Monday Morning Musings

2011-10-03T07:13:00.000-07:00

The song remains the same this morning, with concerns out of Europe weighing on our markets and volatility remaining elevated near extreme levels.

Overnight, China surprised with an improved PMI reading at 51.2 (from 50.9) for September. China's markets were closed, but the news did little to boost sentiment in Hong Kong where their market fell -4.4%.

In Europe, news that Greece does not expect to hit its deficit target has caused another wave of selling in Europe.

The flight-to-safety trade is on this morning, with gains in the usual suspects. The dollar has attracted some buying and is higher, Treasuries are higher, and gold prices are rallying as well. The gains in bonds have pushed the 10-year yield back down to 1.87%. And gold prices have topped $1657. But oil prices are lower so far, down near $77.40.

Our latest ISM reading also came in better-than-expected at 51.6 vs. 50.6 in August. That helped spark some buying and reversed the early losses in the market and pushed stocks into positive territory.

The VIX remains extremely elevated near the 42.0 level.

Trading comment: Investors are happy to put Q3 behind them. Now hopes turn to the month of October which has been know to accompany more than a few market bottoms in history. The graph below shows how again this morning the SPX came down to test the 1120 level. That level has market support since early August, but as you can see we are now testing that support for roughly the fourth time. My worry is that these levels can only hold a few times and eventually will give way. The silver lining of that scenario is that could be a setup for a trading bottom as well. I would like to see the 1120 level broken but then quickly recovered. Sentiment is very bearish at this juncture, and there could be plenty of short-covering to help push the market higher.

Early Look: Stocks Look To End Quarter On A Down Note

2011-09-30T07:37:00.000-07:00

The market opened under selling pressure this morning, following its cues from Asian markets which were down overnight and European markets which are lower across the board this morning. So much for the German vote of confidence on the EFSF appeasing the markets.

We have seen a small bounce in the first hour of trading after some better than expected economic reports. The Chicago PMI reading improved to 60.4 in August, well above the 54.0 consensus. And the UofM consumer sentiment reading was revised upward to 59.4 from an earlier reading of 57.8.

Still stocks are set to finish the quarter on a down note. This quarter's decline on the S&P of roughly 12% is the biggest decline since Q4 of 2008. Pretty ugly. With all of the bad news getting priced in and bearish sentiment reaching extreme levels, one has to ponder the possibility of another October bottom and some sort of year-end relief rally.

The dollar is stronger today, and that is weighing on commodities. Ag commodities are much lower today on the recent crop report. Oil prices are lower below $80.50 so far, and gold prices are also soft near $1625.

The 10-year yield has slipped back below the 2.00% level, currently at 1.92%; and the VIX is spiking another 5.5% to 41.0. It still hasn't surpassed its recent highs, but the persistent high levels in the VIX are disturbing nonetheless.

Yesterday there was a lot of chatter about the slowdown in China becoming more pronounced. China sovereign CDS prices have really been spiking lately. If the wheels come off in China, I think those who are being complacent about a recession in the U.S. might rethink their stance. We shall see.

Trading comment: The trading range for the SPX continues to coil and sets up for a breakout fairly soon. I'm worried that we have tested the SPX 1120 level 3 times now, and a fourth test might not hold. That said, if we can get to earnings season and get some positive earnings reports, that could be a catalyst to breakout over the 50-day average which has acted as resistance for the last two months. As such, I am trying to stay balanced and nimble in the interim without making any big directional bets.

long SH

(Not So) Early Look: Sigh of Relief In Germany

2011-09-29T08:20:00.000-07:00

When the markets are volatile in the opening hour, sometimes my early post is a little late due to trading coming first. This morning I wanted to add to some hedges as I was nervous about the early gains holding.

The vote for the expansion of the EFSF was approved in Germany, which was a good sign. Some thought it might get voted down the first time, like TARP did here in the US. But Europe wasn't up all that much this morning, so I think it was the positive economic data that helped boost our markets.

Final Q2 GDP was revised upward to +1.3% from the prior reading of 1.0%. That's still sluggish growth, but it keeps the economy just above stall speed, imo. Obviously the big question for investors is the economic slowdown still ahead of us, as forecasted by things like the ECRI, stock price declines, and declines in key commodities like copper.

Pending homes sales fell less than expected at -1.2% in August. And weekly jobless claims also surprised to the upside be falling below the 400,000 level (391k).

Commodities are mixed this morning. Oil prices are higher to $82.50, while gold prices are flat near $1617. Copper prices are getting a small bounce.

The 10-year yield is hovering above the 2.00% level for a third day; and the VIX is -3% lower today, but still stubbornly close to that 40 level (39.70), signaling heightened volatility is still with us.

Trading comment: The financials were up the most this morning, so I bought some SKF just as a day-trade flier to hedge. I also added to our index etf hedges that I had taken profits on last Friday. Today is an odd day in that although the Dow is up 160 pts., the growth stocks on my screen are a sea of red. Lots of stocks are down 5-10% today, and the Chinese internet stocks are getting killed on rumors of an accounting probe.

long SKF, SH

Stocks Look Tired After Three Day Rally

2011-09-28T07:44:00.000-07:00

The market was nicely higher in early trading, but has already given back those early gains and is now slightly in negative territory. Yesterday the SPX rallied back up to the 1195 level before losing momentum and closing at 1175.

This mornings burst of buying came on the heels of continued hope that plans in Europe are coming together and they will get the votes needed for their EFSF bailout fund.

In earnings news, both Accenture (ACN) and Jabil Circuit (JBL) reported stronger than expected earnings and their stocks are both higher.

Asian markets were mixed overnight, while Europe has been higher this morning. The dollar is roughly flat, while commodities are mostly lower. Oil prices are pulling back near the $83 level, while gold prices are also down so far to $1641.

The 10-year yield has climbed back above the 2.00% level, but just barely; and the VIX is 1.6% higher this morning to 38.35, and remains at elevated levels indicating traders continue to expect heightened volatility levels.

Trading comment: The trading range between SPX 1120-1220 has lasted for 8 weeks now and a resolution is likely to come soon. With heightened bearish sentiment among the indicators I track, I would not be surprised to see a breakout to the upside. But with the economy slowing and continued strains in the global credit market, I'm not sure how high such a breakout would even carry us. The flip side is that the market is highly news driven in this environment, and any negative developments out of Europe could push the market back to new lows in a hurry. As such, I continue to employ a balanced approach to the market as opposed to trying to get aggressive in either direction.

long SH

Early Look: Sigh of Relief Or Just Window Dressing

2011-09-27T07:39:00.000-07:00

The markets are up nicely again in early trading, following yesterday's roughly 275-point gain in the Dow. Currently, the Dow is up another 230 pts. CNBC said this would be the first back-to-back 200-pt gains for the Dow since 2008, which seems hard to believe, but I haven't checked.

Asian markets joined in the action overnight, rallying across the board. Hong Kong bounced by an impressive +4.2%. European markets kept the momentum going this morning, with Germany up as much as 4.3% at one point.

The gains in Europe started yesterday with the chatter that officials are putting together a plan to stabilize financial conditions. There has been chatter about a Special Purpose Vehicle (SPV) to buy up some of the problem debt. We will have to see if this can pass, but the bank stocks are responding with gains of up to 7% today.

Consumer Confidence for September came in at 45.4, which is up slightly from last month but still a weak number overall. With all of the negative news out there, this reading isn't all that surprising. The correlation with this series and the stock market is fairly high.

Precious metals are bouncing back today, accompanied by a reprieve in the recent dollar rally. Gold prices have bounced back to $1665, and silver prices are getting a bigger bounce. The silver etf (SLV) put in a solid reversal yesterday, and is up 7% so far today. Oil prices are also higher near $83.60.

The 10-year is higher today, trying to get back to the 2.00% level. And the VIX is down -7.5% so far near the 36.0 level.

Trading comment: It's hard to tell if this week's rally thus far is truly due to a sigh of relief coming out of Europe that they are determined to get their arms around the problem, or if it is merely a bounce-back due to window dressing as underperforming portfolio managers look to put money to work after last week's outsized decline in the market. Volume on the Nasdaq rose yesterday, while NYSE volume failed to surpass Friday's level. But the list of market leading stocks remains sparse. I mentioned that I took some partial profits on our index ETF hedges last Friday, but soon I think I would look to add back to those positions.

long SLV

Monday Morning Musings

2011-09-26T07:21:00.000-07:00

The market got a nice bounce out of the gate, but so far it has been short-lived as the volatility remains high and the enthusiasm is proving elusive. There was no real news out of Europe over the weekend, and the fact that no news is sometimes good news may have helped spark a relief rally.

Asian markets were lower across the board overnight, but Europe has been higher this morning, with Germany rallying as much as 2.7%. There has been talk that eurozone officials may be preparing new steps aimed at shoring up the fiscal and financial conditions across the pond, but no definitive news yet.

After last weeks sharp selloff, the markets are pretty oversold and it wouldn't take much to see a bounce this week, especially with quarter-end at the end of the week.

Precious metals remain under pressure, with gold prices dropping below the $1600 mark, and silver prices continuing last week's swoon so far.

The 10-year yield is higher to 1.86%; and the VIX is higher also, up another +3.5% to 42.70.

Financials are actually bucking the weakness so far and leading the early action. Technology shares are lagging, led by Apple (AAPL) where there is chatter of production cuts in iPad2s. Somehow I'm not buying that, as I think they are going to sell every single one they can produce.

Trading comment: The SPX held the 1120 level again last week, and is trying to build on its bounce since then. With the VIX this high, traders are still expecting large swings this week. My gut tells me after last week's sharp selloff, the surprise move this week should be to the upside. But it sure would be nice to have a catalyst for it. I took some small trading profits on our index etf hedges last week, but would likely look to add them back if we get the bounce I am looking for. Engine room...more steam!

long AAPL, GLD, SH, SLV

Early Look: Stocks Bounce From Key Support

2011-09-23T08:11:00.000-07:00

If you were up early enough to see the S&P futures before the open, it looked like the market was going to open lower again. But as the open of trading drew closer, the futures began to slowly improve. In the first hour of trading, the SPX came close to testing that 1120 level again but has since climbed back into positive territory.

Industrials, which have been hit really hard this week, are leading the early action. While energy stocks continue to lag here. The Nasdaq is outperforming the S&P so far also.

There hasn't been a lot in the way of market moving news this morning. Nike (NKE) posted better than expected earnings, and MCD raised its dividend. But there haven't been any economic reports to speak of.

Two times in August the SPX came down to test the 1120 level but held there. Yesterday and today (so far) the market has held those levels again. So it will be interesting to see if the market again bounces higher from here next week (into quarter-end), or if the third time down testing these levels is going to finally give way and we see a break.

Asian markets were lower overnight, and Europe is lower this morning as well. The dollar is lower today, but not really helping commodities much. Oil prices are struggling to hold the $80 level, and gold prices have pulled back further to $1675. Silver has also gotten hammered this week, and I am buying a little for a bounce.

The 10-year yield is bouncing a bit to 1.80%; and the VIX is only down -1.6% to a still high level above 40.

Trading comment: No sense making any big moves today. The market has been down a LOT this week, so it is normal to see some short-covering ahead of the weekend. But we are in that time period where there could be big news any weekend out of Europe, so I don't think many people are going to take big positions on this Friday. More likely, investors are going to square up their exposures, and try to be as flat as possible to minimize the overnight risk. Rest up, next week promises to be another fun one.

long SH, SLV

Mid-Day Update: Europe Hogging The Spotlight

2011-09-22T08:46:00.000-07:00

The global selloff started last night in Asia, partially in response to the selloff here in the U.S. but some slowing economic data didn't help the situation. When Europe opened early this morning, its markets were also down sharply.

The concerns about Europe are not going away, and I get the sense that the authorities over there aren't willing to do something "big" without the cover of a major disaster. Whether its a Greek default or a major financial institution in trouble, the potential outcomes are equally unpleasant to this investor.

The market seemed as if it was hanging around to see if the Fed might pull a surprise rabbit out of the hat. When the news came out yesterday about Operation Twist, the selling picked up steam. But the buying into long-date Treasuries picked up with a vengeance. This morning, the yield on the 10-year Note has fallen to a record low of 1.77%.

Commodities are also down sharply today. Oil prices have fallen back to $81.25, while gold prices are now down near $1733. The gold etf (GLD) is sitting just below its 50-day average.

The VIX has spiked higher again this morning, up 8.5% right now to 40.50. Interestingly, if you look at the VIX chart, today's action so far looks like a 4th lower high.

Trading comment: During the recent market rally I had been writing that I didn't want to get sucked in, and that I was trimming equity exposure and adding to our index hedges. That makes me feel at least a little better on days like today, when my screen shows a sea of red. I still think we could see some buying surface as we near quarter-end, but I would continue to employ the same strategy. Any buys I may look at on the long side will have a short leash attached.

Disclosure: Jordan Kahn and/or KAM clients are long GLD, SH though positions can change at any time

FOMC To Commence "Operation Twist" To The Tune of $400 billion

2011-09-21T12:33:00.000-07:00

Here is the latest statement from the FOMC:

Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

Early Look: Tech Relative Outperformance Continues

2011-09-21T08:12:00.000-07:00

The market was briefly higher in early trading, but has since dipped back into negative territory. Actually, the SPX is lower on the day right now, but the Nazz is still barely in positive territory.

Tech is handily outperforming today, and continuing the relative sector outperformance that we have seen of late. Materials are taking it on the chin so far this morning. The poster child for the group could be Freeport McMoran (FCX) which is down more than -5% as copper prices have plunged recently and there is chatter of slowing demand from big players like China.

In corporate news, solid earnings reports from ORCL, ADBE, and GIS have boosted all three of those stocks this morning. Also, Microsoft raised its quarterly dividend by 25%, but so far its not helping the stock.

In economic news, new home sales came in better than expected at 5.03 million units in August, which is up from last months rate of 4.67 million units. Not bad for a month like August, when it seemed like bad news was everywhere.

Asian markets were mixed overnight, but China was able to rally 2.7%. Europe's markets are down again this morning despite EU officials saying they believe progress is being made on Greece's debt.

The dollar is higher this morning, and commodities are mixed. Oil prices are higher near $87.88, while gold prices are lower to $1797.

The 10-year yield is lower again to 1.91%, and getting close to hitting new lows in yield. The VIX is bouncing higher from its 50-day average, up 4.5% to 34.38.

The Fed will make its policy statement today and there is a ton of chatter about "Operation Twist", where the Fed might sell short-dated Treasuries and buy long-dated ones. With yields on the 10-year already below 2.00%, I'm not sure how big of an effect this could possibly have. If it spurs more bank lending, I'm all for it, but it would seem there might be a better solution if increased bank lending is truly the aim. Let's see what the Bernank has to say about it.

Early Look: Italy's Downgrade Priced In

2011-09-20T07:31:00.000-07:00

The market was slightly lower in early trading, but has since bounced back into positive territory. Asian markets were lower overnight, but Europe was actually higher this morning.

Europe's rally is somewhat surprising given that Italy had its debt rating downgraded last night by Moody's. Speculation about this downgrade has been talked about since last week, so it wasn't a total surprise. And news that Greece is closer to an austerity plan that will help them secure aid seems to be trumping the news on Italy today.

Healthcare stocks are leading the early action, while industrials are lagging. The dollar is also lower today, helping to push oil prices back towards $86.60 and gold prices back above the $1800 level.

The Fed will start its 2-day meeting today with its latest policy statement tomorrow afternoon. There is a lot of chatter about 'Operation Twist', so we will have to see how much detail the Fed gives us as well as their expectations for what they think this will accomplish.

The SPX is still trading below its 50-day average resistance, currently around 1223. For its part, the Nazz is enjoying its thirds straight day above its 50-day and showing relative outperformance over the SPX recently.

Trading comment: Yesterday, while the overall market was lower there was a growing handful of growth stocks bucking the broad weakness and trading higher. This is a positive sign for the bulls, and could continue into quarter-end as portfolio managers look to add performance after underperforming recently.

Early Look: Renewed Worries Over Greece

2011-09-19T07:25:00.000-07:00

The markets are sharply lower this morning on the heels of overnight losses in Asian markets last night as well as pronounced weakness in Europe this morning. Last week was a nice reprieve to the selling, as the markets bounced back 5%. But this morning there are renewed worries about Greece's ability to meet its debt obligations.

President Obama is set to deliver a speech about balancing the federal budget, which will include some ideas for new taxes on the "rich". Don't expect this to do much of anything to help the markets.

Outside of that, there isn't a ton of news. There was some M&A speculation that Goodrich (GR) will get a bid, and Tyco is set to spit itself up. But most of the days action is simply sentiment driven.

The dollar is higher today relative to the euro and yen. And commodities are lower. Oil prices have fallen back to $85, while gold prices are also lower near $1785.

As for the 10-year yield, is has fallen back below the 2.00% level and currently is hitting 1.96%. The VIX bounced off its 50-day average and is up 12% right now to 34.75.

Trading comment: It was a little uncomfortable to remain so defensive last week as the market climbed higher for 5 straight days. But without any improvement on the fundamental front, it seemed that any bit of bad news to resurface could knock the market right back down. That is the feeling I have this morning, although technically the market is still in this rangebound battle. SPX 1140 has been holding in as support while 1230 has been resistance. As the range narrows, we will get closer to a breakout. The high levels of bearish sentiment support a breakout to the upside, but the fragility of the market make it a tough bet.

long SH

Early Look: Europe Considering TALF-like Program

2011-09-16T08:02:00.000-07:00

The markets have been volatile again in early trading. Coming off the heels of very solid rallies in Asia and Europe, our markets began to climb in the first hour of trading but so far traders have sold into that rally and pushed the indexes back to the flat line.

It's very possible that folks are nervous about going long into the weekend, given that any piece of bad news to surface out of Europe over the weekend could hit the markets come Monday morning. Also, the markets have put in a very nice week already, with the major indexes up roughly 5% for the week so far.

Asian markets rallied overnight after news that the major central banks would provide dollar liquidity to Euro banks. Europe also rallied again today on news that a TALF-like program is also being considered in Europe.

In economic news, the Consumer Sentiment Survey for August actually rose to 57.8 from 55.7 last month. Go figure, someone must be looking at the silver lining out there.

The dollar is higher today, while commodities are mixed. Oil prices are lower near $88 right now, while gold prices are trying to get back to the $1800 level, still trading slightly below that.

The 10-year yield had a nice rise yesterday, and is hovering near 2.07%; and the VIX came all the way down to 30 this morning before bouncing higher as it approached its 50-day average.

Trading comment: A lot of people are watching key technical levels right now. The SPX needs to get above its late August highs at SPX 1230 to signal more upside. So far today it has been unable to hold the upside momentum. As for the Nasdaq, 2600 has been upside resistance of late. But the growth index is actually above those levels this morning, and sitting right on its 50-day average. Looks like we will have to wait until next week to see if the market can build on this week's gains.

Early Look: European Banks Get Liquidity Boost

2011-09-15T08:50:00.000-07:00

The markets are in rally mode in early trading after some good news out of Europe. The ECB has coordinated efforts with the Fed, Bank of England, Bank of Japan, and Swiss Natl Bank to offer European banks dollar loans. This liquidity injection has improved sentiment on the continent, and Europe's markets are higher this morning. Asian markets were also higher overnight.

The dollar is lower on the news, while most commodities are mixed. Oil prices are higher near $89.60, while gold prices are down again, falling back to $1782 currently.

Economic news was mixed this morning, with the CPI coming in higher than expected, and a slight improvement in the Philly Fed Survey to -17.5 from -30.7 last month.

Financials and industrials are leading the early action, while defensive issues like healthcare and consumer staples are lagging.

The 10-year yield is getting a nice boost, trading at 2.07%. And the VIX is down another 4% currently to 33.18.

Trading comment: Yesterday's rally felt like mostly short-covering, as it was led by low quality stocks and overall volume was below average. But that is how a lot of rallies start. I think performance anxiety is playing a factor, with most managers underweight and underperforming as quarter-end approaches. Not to mention this week's options expiration, which often leads to pronounced moves. If the SPX can get back above 1220, we could be back in rally mode.

long SH

Wall Street All-Stars

2011-09-14T08:28:00.000-07:00

I am writing for a brand new website called Wall Street All-Stars. The site was co-founded by Cody Willard and Scott Rothbort. Both of these guys are talented writers and market thinkers, and both are former colleagues from RealMoney.com.

The site is still putting together a talented roster of contributors. So please check it out, and feel free to provide any comments you have about the new site.

Thanks,
Jordan

Early Look: Geithner Says 'No More Lehmans'

2011-09-14T07:34:00.000-07:00

The markets are choppy in early trading, after opening on a higher note. Early this morning Europe's markets were trading higher which help improve the tone of U.S. markets at the open. But after a brief bounce to SPX 1180 after the open, the markets have slipped back into negative territory. That said, it is still early in the session.

The improved tone in Europe today flies in the face of the downgrades of some of France's big financial institutions, but it is likely because that was already priced into stocks at this point.

The other news item that helped the markets bounce were comments from Secretary Geithner at a conference in NY where he said that there would be "no more Lehmans" in Europe, and that officials over there were committed to preventing a big institution from failing. Despite his comments, the markets want to see more concrete evidence in the form of a bigger EFSF of some other solution before they take Geithners words to heart.

The euro is bouncing at the expense of the dollar. But this isn't helping most commodities. Oil prices are lower near $89, and gold prices have pulled back to $1281.

In economic news, August retail sales were flat, and up 0.1% ex-autos. Both figures are below consensus estimates.

The 10-year yield is still struggling below the 2.00% level; and the VIX is slightly higher in early trading near the 37.25 level.

Trading comment: Still no change to my recent trading mantra that I prefer staying defensive at this juncture. We used yesterday's bounce to add a little bit to our index hedges. We are still net long in the equity portion of our balanced accounts, but have been decreasing our exposure at the margin.

long SH

Rumors In Europe Causing Short-Covering

2011-09-13T08:26:00.000-07:00

The market was lower most of the day yesterday until late rumors surfaced that China might be willing to buy up some Italian debt. That caused the shorts to scramble, and the market rallied strong into the close. Although volume still finished below that of Friday's levels.

I doubt that China is looking to buy much sovereign debt in Europe. Maybe they would be looking to buy into strategic companies, like oil companies (Eni), electric producers, etc. Those would be strategic investments for China, not simply trying to throw the continent a lifeline.

This morning, the futures were lower until more rumors surfaced that Germany and France may be meeting to announce some support for Greece. So it seems like a lot of people are leaning short, but skittishly so as they look to cover those shorts on any perceived positive news out of Europe.

This type of volatility is one of the reasons that the VIX remains at extreme elevated levels. Despite this morning's rally, the VIX is still higher at 38.75. And Friday's options expiration will likely keep volatility elevated this week.

In corporate news, Best Buy (BBY) reported earnings that fell short of consensus. As a result, the stock is getting hit for -8% currently.

The dollar is lower today, which is boosting commodities. Oil prices have rallied back to $89, while gold prices are also higher near $1827.

The 10-year yield is trying to get back above 2.00%, but not having much luck so far. I recently added to my TBT position looking for at least a small bounce in yields.

Trading comment: The SPX has bounced a quick 30 points from yesterday's lows, and it is hard to tell which way options expiration will exert its force on the market for the rest of the week. But as I have said, until we get some actual improvement in the landscape (as opposed to rumors) I am maintaining our defensive posture and fading most rallies.

long TBT, SH