Wednesday, November 30, 2011

Central Banks Coordinate Move To Ease Credit Crunch

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.

Tuesday, November 29, 2011

Consumer Confidence Jumps

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.

Monday, November 28, 2011

Hope Springs Eternal In Europe

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.

Tuesday, November 22, 2011

Early Look: Q2 GDP Revised Lower

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, November 21, 2011

Monday Morning Musings: All Policy, All The Time

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

Friday, November 18, 2011

TGIF - The Song Remains The Same

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.

Thursday, November 17, 2011

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

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.

Wednesday, November 16, 2011

Chart of the Day: Holding support

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. this new news?

Early Look: Dour Sentiment Drives Soft Market Open

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.

Tuesday, November 15, 2011

Early Look: Data Better Than Consensus Estimates

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, November 14, 2011

Monday Morning Musings

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.

Friday, November 11, 2011

Get Mental

A good discussion of market sentiment and investor psychology:

Bond Yields In Italy Ease Further

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

Thursday, November 10, 2011

Flight-to-Safety Trade Coming Off

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

Wednesday, November 09, 2011

Early Look: Delayed Reaction By The Market

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.

Tuesday, November 08, 2011

Italy's PM Hangs On By A Thread

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.


Monday, November 07, 2011

Monday Morning Musings

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.

Friday, November 04, 2011

Italian Bond Yields Front And Center

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.

Thursday, November 03, 2011

Draghi Starts ECB Off With A Rate Cut

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

Wednesday, November 02, 2011

Follow The Bouncing Euro

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

Tuesday, November 01, 2011

Debt Concerns Flaring Up In Italy

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.