Thursday, January 30, 2014

Stocks Bounce On Strong GDP Report

After another day of holding near the SPX 1775 levels, stocks are bouncing this morning.  The Q4 GDP report came in above expectations, and we are also seeing some positive reactions to earnings reports.

The first reading of Q4 GDP came in at 3.2%, above the 3.0% forecasts.  That shows that the economy ended 2013 with some momentum that should continue into 2014.  And as the fiscal drags sunset this year we might even start to see more readings above the 3.0% level that has been lacking most of this economic recovery.

The pending home sales report for December showed a big drop of -8.7%, but this data can be lumpy especially around year-end and holiday season.

Earnings reports continue to come in fast and furious.  This morning we are seeing more positive reactions than we have most of the week, at least anecdotally.

Stocks rising on earnings: FB, LVS, QCOM, ALXN, TMO, V, DGX, CRS, ATK, UPS, HAR, BEN, US

Stocks falling on earnings: ALGT, BEAV, MMM, ADT, SHW, DOV, MAN, XOM, POT

Asian markets ended lower.  China's HSBC manuf. PMI ticked down to 49.5, indicating the manufacturing sector is back in contraction.  HSBC said the labor market in China shed jobs at the fastest pace since 2009. 

European markets are roughly flat today.  Eurozone consumer confidence ticked higher to -12.0 from -14.0.  Spain's GDP rose 0.3% last quarter, but -0.1% vs. the year ago period.  And the Bank of England said the country's economy is making progress but still has a long way to go before a rate hike is introduced.

The 10-year yield is up near 2.71%.  Gold prices are lower today as some of the flight to quality buying from yesterday fades.

The volatility index is 5% lower today to 16.50, but the VIX is still above that 15 level which lately has meant that traders still expect some selloffs in the near term.  Below the 15 level has market periods when the market is in rally mode.

Trading comment: We are still being patient with cash that we have raised recently.  The S&P 500 has been probing for support and testing that 1775 level, but it still is trading below its 50-day average and still needs to consolidate the multi-month run-up that just ended a week ago.  But we are watching those stocks that report solid earnings and have favorable reactions in their stocks.  Those stocks could emerge as the leaders when this corrections runs its course.

Wednesday, January 29, 2014

Emerging Market Volatility Unsettling To Investors

Most of the talk from international markets has centered around Turkey lately, where the lira has been falling and the govt worried about capital outflows from the country.  Last night, Turkey's central bank held an emergency meeting where they raised their key rate from 7.75% to 12.00%.

That's a big rate hike and it briefly stemmed the tide.  The lira rallied in response, and S&P futures that trade overnight also rallied.  Asian markets also rallied in response.  The Japanese yen moved lower and helped Japan's stock market rally +2.7%.

But as the night wore on the initial effect of the Turkish central bank move wore off.  The lira began to weaken and so did other foreign currencies like the Russian ruble.  By this morning, European markets were lower and our markets opened on the downside as well.

The People's Bank of China added more liquidity to try to help.  Today we will hear from the Fed here in the US, but they are unlikely to alter their plan based on a couple of days of volatility in emerging market currencies.  The Fed will likely reduce their asset purchases by another $10b to $65b per month for now.

The 10-year yield is down another 3 bps to 2.71%.  And there is a bit of a flight to safety into gold given the currency concerns.  The yellow metal is up to $1265 today.

The volatility index spiked back to the 18 level this morning, but it has since faded back to 17.17, up 8% so far.

Trading comment: Volumes will likely be running a little lower than average until after the FOMC meeting.  We think it is likely that the Fed will reiterate the same themes from last meeting, and continue their 'taper' with an additional $10b reduction in the pace of their asset purchases.  Remember, even while they are reducing their asset purchases they are still buying more securities and increasing the size of their balance sheet.  But the economy seems on solid footing and they will likely recognize that in their commentary.  As for the stock market, still sitting on our hands as we watch the market try to find some solid support levels.  So far SPX 1775 has held again.

Tuesday, January 28, 2014

Stocks Bounce But Apple Weighs On Nasdaq

Stocks are bouncing in early trading.  They attempted to bounce yesterday also, but sellers emerged fairly quickly and helped push stocks lower for a third consecutive day.  Markets are now pretty oversold, so a bounce from here would not be surprising.

Housing stocks got a boost from a strong Case-Shiller report which showed that housing prices rose 13.7% in November, which followed a 13.6% increase the prior month.  Separately, the consumer confidence report for January came in at 80.7, which is a nice increase from last month's reading of 77.5.

Most sectors are trading higher this morning.  The tech sector is being weighed down by two reports.  One is Seagate (STX) which missed estimates slightly but the stock is down -10%.  The other is AAPL, which beat estimates but sold less iPhones that the Street was looking for.  The company mentioned supply constraints and some changes at mobile carriers.  Also, it looks like the company gave conservative guidance for next quarter which may have disappointed some investors.

Asian markets were mixed overnight.  The Reserve Bank of India hiked its key rate to 8.00% last night from 7.75%.  Also, money market rates in China are on the rise again, despite the People's Bank of China conducting operations to improve liquidity.

Europe's markets are higher.  Great Britain's GDP rose 2.8% year/year, and consumer confidence rose in both France and Italy.

The 10-year yield is pretty steady so far at 2.76%.

After its recent spike above the 18 level, the volatility index is lower by 6% so far today to 16.35.

Trading comment: The S&P 500 may have found some short-term support near the 1775 level it tested yesterday.  This was also the area the SPX bottomed at back in December.  But we still think it is prudent to be patient here.  The most common course of action is for the market to bounce in the short-term, but then turn lower after running into resistance.  Said resistance could come in the form of the overhead 50-day average, which resides near SPX 1812 currently.  Then there is often another pullback when we see if the near-term support holds again or if it breaks and the market moves lower.  It is also during this time that new leadership often emerges.  So that is what we are on the lookout for at this juncture.

KAM Advisors has long positions in AAPL and STX

Monday, January 27, 2014

Monday Morning Musings

Markets are seeing continued indecision in early trading after the indexes opened with a bounce into positive territory, but so far that bounce has been sold into by traders and the major indexes have moved back into negative territory for a third day.

Friday's session saw heavy selling which took many of the major indexes below their 50-day averages.  It is still very possible that we see dip buyers step in and buy stocks for a trade, but so far the markets have not fully stabilized.

In economic news, December new home sales came in below expectations at 414,000, which is also below last month's rate of 457k.

In earnings news the only big company reporting this morning was Catepillar (CAT), which beat earnings and announced a $10 billion buyback.  That is helping push the stock higher and supporting the Dow Jones average vs. the others like the S&P 500 and Nasdaq.

Asian markets were lower across the board overnight.  Emerging market currencies continue to slide vs. the dollar.  A strong Japanese yen also hurt Japan's stock market to the tune of -2.5%.

Europe's markets are mixed to lower today also.  Moody's affirmed France's sovereign debt rating and the ECB President said the central bank could buy securitized bank loans if it does launch a quantitative easing program.

The 10-year yield is roughly flat so far at 2.73%.  The volatility index saw one of its biggest spikes in years Friday when it surged 32% to the 18 level.  Today it is just down fractionally to 17.90.

Oil prices are weaker to $96.40 and gold prices are down just slightly around $1260.

Trading comment: After last week's big selloff it would be pretty normal to see some sort of bounceback.  But the market has been overdue for a correction, and chances are it has a little more time to go before we are back in bull mode again, maybe a few weeks.  The S&P 500 fell pretty far below its 50-day average on Friday.  A common scenario would be for the SPX to rally back to its now overhead 50-day, but then turn lower again after an initial test of that resistance level.  As such, we think there is time to be patient and would look to start buying again when the SPX regains its now overhead 50-day line.

Thursday, January 23, 2014

Are The Wheels Coming Off China's Growth Engine?

Our markets had been holding up surprisingly well lately, until this morning's data from China seems to have rattled confidence for the time being.  Of course, it's still early in the day so its possible that we see some of this selling pressure abate by the close and for the market to recoup some of these losses.  So the close today will be telling.

China's HSBC Manuf. PMI fell into the contraction zone by falling to 49.6 from 50.5 previously.  It is the first time in 6 months that it has fallen below the 50 level.  The HSBC chief economist described it as softening growth, although I'm sure China will try to spin it as temporary.  Emerging markets are selling off in response.

Europe's markets are faring better after the Eurozone manuf PMI rose to 53.9 from 52.7.  And the services PMI also rose to 51.9 from 51.0.  So it appears that Europe continues to be on the mend from its recent recession.

Earnings reports continue to roll in and again today we are seeing more stocks falling in reactions to earnings than rising.

Stocks rising on earnings: MCD, NFLX, EBAY, FFIV, UNP

Stocks falling on earnings: UAL, SNDK, WDC, JEC, PCP, LMT, NOK, BGG, LUV, JBHT

Commodities are higher with oil prices now topping $97.65 and gold prices firmer today to $1260.

The 10-year yield is sliding further to 2.80%.  And the volatility index is spiking to the 14 level.  We noted recently that whenever the VIX gets down near the 12 level we usually see a bounce from there.  This scenario held true again this time around.

Trading comment: We had been thinking stocks would make another breakout to new highs.  Its possible that this weak China data could put that on hold for a bit, but the economic picture in the US is still improving and that should cause investors to shrug off the China news in the near-future and put the focus back on US stocks.

Wednesday, January 22, 2014

Earnings Season Heats Up With More Mixed Results

There is no real tone to discern from earning season.  Overall, I would say we have seen more disappointments from big companies that positive reactions.  But we still have several bellwethers left to report.

This morning the Dow is down again as its second biggest component IBM is trading lower after reporting earnings.  Semis are higher after positive reactions in TXN and XLNX.  Retailers are being weighed on by disappointing results from Coach (COH).

There aren't any economic reports moving the market today.  Treasury prices are a bit lower and that has yields on the 10-year Note up to 2.84%.

Commodities are mixed with oil prices higher again to $96.30 and gold prices slightly weak around $1239.

The volatility index is up a bit to 13.08, which is still a very low absolute level.

Stocks rising on earnings: ZION, XLNX, TXN, HURN, TXT, UTX, VMW, NTRS, EAT, NSC

Stocks falling on earnings: IBM, COH, ABB, MSI, ATI, STJ, PH, ABT, FCX, APH, PGR

Asian markets closed higher overnight.  The Bank of Japan made no changes to its monetary policy.  Europe's markets are lower today.  Great Britain's unemployment rate fell to 7.1% from 7.4%.  It now stands just 0.1% above the threshold that the Bank of England has stated for tightening policy.

Trading comment: The lackluster earnings reports we have seen so far have done little to cause a correction in the market, despite the fact that the market came into the new year quite overbought and with investor sentiment very high in complacency.  The S&P 500 finished 2013 at 1848 and this morning it sits at 1843, not far from its recent highs.  This sideways consolidation was the hallmark of trading last year, and so far the pattern looks similar.  The longer we trade sideways like this the closer we think the markets are to another breakout to new highs.  So right now it looks too early to get defensive, even though we do expect the overdue correction in stocks to emerge at some point this quarter.

Tuesday, January 21, 2014

Tuesday Tidings

The markets opened on a strong note following the holiday weekend here in the US, but after touching its recent highs the S&P 500 has given up most of its gains while the Dow has traded back into negative territory.  It's still early, so we will have to see if buyers show up again toward the end of the day.

There isn't any economic data moving the market.  In M&A news, Dan Loeb has taken a $1.3 billion stake in Dow Chemical aimed at increasing value for the company.  The stock is up 7% in reaction.

Commodities are mixed.  Oil prices continue to trade higher with crude now closing in on $95.  Gold prices remain weak and are trading near $1240.

The 10-year yield is roughly flat so far today around the 2.83% level.

Earnings season is set to heat up this week, and a handful of companies have already reported this morning.

Stocks rising on earnings: SBNY, BHI, DAL, AMTD, KNX

Stocks falling on earnings: SAP, HAL, TRV, VZ, JNJ

Asian markets were higher overnight.  China's GDP rose 7.7% year/year, which was slightly higher than estimates but a slowdown from last quarter's 7.8%.  Industrial production and retails sales also rose in-line with estimates.

Europe's markets are modestly higher.  Eurozone ZEW economic sentiment rose to 73.3 from 68.3.  Italy's industrial new orders rose while Spain's industrial new orders fell.

Trading comment: The S&P 500 touched 1849 this morning, which would put it in positive territory for the year.  Those watching the 'January effect' would like the SPX to close above 1848 to keep the theory intact.  So far the reactions in stocks to earnings reports have been somewhat mixed.  And we still have plenty of big companies left to report.  I think we need to see some positive reactions in some bellwether stocks to help push things higher.  But the fact that the recent pullback in the market yielded little to the bears other than a 2% dip is another bullish sign.  Our biggest concern is that investor sentiment has grown too complacent and that could lead to a bigger correction at some point in the near future.

Friday, January 17, 2014

Midday Update - Earnings Season Starting With Mixed Results

Stocks are mixed in morning trade, with the Dow trading higher on a few earnings reports from its components with positive reactions.  The Nasdaq is lower on the day as some tech stocks lag.

In economic news, the January Univ of Mich consumer sentiment survey showed a drop in sentiment to 80.4 from 82.5 in December.  Also, housing starts rose in December and November's figures were revised higher.  Homebuilding stocks are down today nonetheless.

Commodities are mixed with ag prices lower but gold higher near $1252 and oil prices up to $94.55

The 10-year yield is down a touch to 2.83%.

Stocks rising on earnings: AXP, GS, MS, SLB

Stocks falling on earnings: INTC, GE, COF

Asian markets were mostly lower overnight.  Japan's household confidence survey declined to 41.3 from 42.5.  And the People's Bank of China said it will use various liquidity management tools to adjust liquidity in order to maintain reasonable growth in credit.

European markets are higher.  Great Britain's retail sales spiked 2.6%.  And the EU is again considering a ban on proprietary trading for the largest banks.

Trading comment: Once again the markets bent a little this week and had a chance to break but didn't.  That leaves the same folks who have been waiting for a bigger pullback in the market forced to make the tough choice of sitting on the sidelines longer or paying up to get involved in this market.  We certainly do not expect the same low volatility stair-step market we saw in 2013, but in the near-term we could be in store for more new highs. 

Wednesday, January 15, 2014

Back To New Highs

The market is rallying nicely in early trading, and that has pushed most of the major indexes to new highs.  For now it looks like the big selloff on Monday could turn out to be another one day wonder.  We haven't seen any follow through yet and today the indexes have more than reversed those losses. 

Tech stocks are higher with AAPL having a nice morning after inking its deal with China Mobile to sell the iPhones on their network.  Financials are also having a good day, led by Bank of America (BAC) which reported better than expected earnings.

In economic news, the Empire Manuf survey for January jumped to 12.5 from 1.0 last month.  This was well above expectations.

Bond yields are higher.  After testing its 50-day average on Monday, the 10-year yield is higher for a second day back to 2.90%.

Commodities are mixed with oil prices higher to $94.15 but gold prices a bit weak around$1239.

The volatility index  is back down near the 12.0 level where we have seen it find support and bounce from several times.

Asian markets were mostly higher overnight.  Japan bounced back +2.5%.  Singapore's retail sales fell -8.7%.  And the Peoples Bank of China said it would maintain prudent monetary policy without much changes for 2014.

Europe's markets are also higher today.  Swiss retail sales rose 4.2%.  And the World Bank increased its 2014 GDP growth forecast to 3.2% from 3.0% previously.

Trading comment: Markets making new highs is a bullish sign.  Many folks who are worried about the "January effect" are watching the SPX 1848 level.  If the S&P 500 closes in positive territory for January - above 1848 - it is supposed to have much higher bullish implications for the remainder of the year than if the market closes lower in the first month of trading.  This comes from the Stock Trader's Almanac which has calculated the results.  It does seem like there was some latent profit taking that folks pushed into 2014 rather than late last year so that they could defer the capital gains for another year.

KAM Advisors has long positions in AAPL and BAC

Tuesday, January 14, 2014

Stocks Bounce Back From Drubbing

The selling really picked up in yesterday's session for the biggest down day we have seen in awhile.  Of course, with the S&P 500 pulling back -1.3% yesterday it doesn't rank as a big selloff its just that we haven't seen much selling in the last several months.

This morning stocks are bouncing back nicely.  One economic report that helped was the December retail sales report that showed retail sales rose 0.7% ex-autos, which was better than expected.

In earnings news, two of the biggest banks - JPMorgan and Wells Fargo - both reported earnings that beat expectations.  JPM is trading higher while WFC stocks is lower in reaction.  JPM had a bigger beat, but both banks showed large declines in mortgage originations.  ISRG is trading higher after issuing upside guidance; ditto for ACT.

Asian markets ended mixed overnight.  China was higher while Japan got hit for -3.1% on the rising Yen.  In China, 5 companies that were set to come public have delayed their IPOs.

Europe's markets were also lower this morning.  Eurozone industrial production rose 3.0% vs. a year ago, which was better than expected.  EC President Barroso said the Eurozone recession is over but complacency must be avoided.

The 10-year yield is a bit higher to 2.85%.  Oil prices are higher around $92.40 and gold prices are firmer as well near $1253.

Yesterday saw a big intraday reversal in the volatility index.  We commented yesterday morning how low the VIX looked at 11.82.  As the day wore on the VIX spiked as much as 15% to a high of 13.65 as the selloff in stocks picked up steam.  Today it is down nearly 8% back to 12.25.  We think it will bounce around in this 12-15 area so we are probably near that lower bound currently.

Trading comment: After yesterday's higher volume selloff, it is likely that the market has more work to do.  Probing additional downside would not be surprising in the near-term, but at the very least some additional sideways consolidation is in the cards.  So we think we can be patient and not chase anything.  Extended stocks are starting to pull back while others are starting to complete their recent consolidations and could start looking attractive again in short order.

KAM has long positions in ACT, JPM, WFC

Monday, January 13, 2014

Monday Morning Musings

Markets are flat to slightly higher in early trading.  Friday's weaker than expected jobs report could have hit the market harder, but didn't.  It could be that investors are viewing the extreme cold temps as a one-off factor.  But if January's jobs report disappoints again it would be another story.  Most economists are predicting a pickup in the economy in 2014, but weak jobs growth isn't part of that forecast.

Retail stocks are having a rough morning after both Lululemon (LULU) and Express (EXPR) lowered guidance for the quarter.  LULU stocks is down quite a bit.  Ditto shares of SODA which also lowered guidance.

On the plus side, shares of BEAM are 25% higher after Japanese firm Suntory agreed to buy the beverage maker for $83.50 a share.

There is no real economic data out today.  The 10-year yield dropped a significant amount on Friday, given that most investors are poised for higher interest rates.  The 10-year yield is down a little more today to 2.85%.

Also, the volatility index is continuing its downward trend, breaking below the 12.0 level this morning to fresh 10-month lows of 11.90.  The VIX doesn't often stay at these low levels for long and we would not be surprised to see a quick spike higher in the near-term.

Asian markets were mixed overnight.  Japan's PM Abe saw his approval rating increase to 62%.  In China, the Ministry of Finance became the second organization over there to target 2014 GDP growth of 7.5% (with a lower limit of 7.0%).

Europe's markets are mostly higher.  Italy's industrial production rose 1.4%.

Trading comment: It seems we are getting into that familiar pattern where the market works off its overbought condition by trading more in a sideways fashion than a big decline.  Friday's weak jobs report could have hit a weak market hard, but stocks hung in there and even recouped their early losses.  That makes us think that we are probably getting close to another breakout to new highs in the major indexes, which could spur another round of buying and pull some additional buyers in off the sidelines.  The "overdue" correction that many strategists are looking for is still out there, but we don't see signs of it materializing imminently. 

Wednesday, January 08, 2014

Strong ADP Report Supports Further Tapering

Stocks opened on a down note, but the strong ADP payroll report helped give stocks a boost.  The Nasdaq reversed its early losses and is trading in positive territory currently while the S&P 500 is basically flat.  The Dow is lower on the day so far.

Chips stocks got a boost from a better than expected earnings report from Micron (MU), and they are helping the Nasdaq outperform today.

In economic news, the strong ADP Employment report showed that 238,000 nonfarm jobs were added, above expectations for closer to 200k additions.

Treasuries reacted to the news by selling off, and that pushed the yield on the 10-year Note up 6 basis points to 3.00%.

Commodities are also mostly lower with gold prices trading down to $1221 and oil prices easing back near $93.

The volatility index is only fractionally higher to the 13.0 level, still a very low absolute level and not indicative of traders anticipating a lot of near-term volatility.

Asian markets ended mixed overnight.  One of China's big banks said it expects the country's GDP to grow 7.8% in 2014.  Money market rates in China eased further, with one-month SHIBOR falling 27 bps to 5.65%.

European markets are lower on the day.  Eurozone retail sales rose 1.4%, above expectations.  Italy's unemployment rate rose to 12.7% from 12.5%.  And reports suggest the IMF plans to upgrade its forecast for global growth.

Trading comment: The stock market again seems to be exhibiting behavior we saw last year when it often worked off its overbought conditions by trading in a sideways consolidation fashion rather than the sharp pullbacks that were more characteristic of the 2010-2012 timeframe.  I think a lot of investors were hoping for a pullback early this year to add to equities.  But the longer the market trades sideways like this the higher the chances of another breakout to new highs and that could pull additional buyers in off the sidelines as they fear another year of underperformance and being left out of the bull market.

Tuesday, January 07, 2014

Dip Buyers Return

Markets are nicely higher in early trading.  After three consecutive down days to start off the new year dip buyers have surfaced and are trying to help the markets enjoy their first positive day of 2014.  The Dow is up over 100 points in the first hour, but it's still early so we will have to see if sellers resurface later in the session.

Commodities are mostly higher, but metals are lower with gold prices down near $1226.  Oil prices are higher around $93.90.

Bond yields are still subdued with the 10-year T-note yield flat near the 2.95% level.  Interest-rate sensitive groups from REITs to preferreds to many closed-end funds have enjoyed bounces so far in 2014 after being subject to heavy tax-loss selling at year end.

The volatility index is down over 4% this morning below the 13 level.

Asian markets were mixed overnight.  Money market rates in China eased further with the 1-week SHIBOR rate down 55 basis points to 5.93%.  Separately, Japan's monetary base expanded 46.6% year-over-year.

Europe's markets are closing near their highs of the session.  Eurozone core CPI rose 0.7%.  And Germany's retail sales rose 1.5%.  Also, Ireland made its official return to international bond markets.

Trading comment: We haven't done much buying yet as we feel the markets likely have some further consolidation in the near-term.  Many stocks we look at remain extended, but we are not opposed to buying fresh breakouts in good stocks if they occur.  You still hear a lot of talk about the market being overdue for a bigger correction, something in the 5-10% range, but we don't think it is upon us at this juncture.  Our best guess is that something like that could come in the next few months.  As we mentioned above, we put money to work before year-end in many beaten down preferreds, which have bounced nicely already in the first few days of the year.  Nice bonus for fixed income investors who didn't have much to cheer about in 2013.

Monday, January 06, 2014

Monday Morning Musings

The market started out of the gate on a higher note, but has since given up its early gains and is now in negative territory.  There hasn't been too much in the way of market moving news, and it remains to be seen if the frigid weather across the east might keep volume levels low again.

In economic news, the December ISM Services Index came in below expectations at 53.0 from 53.9 the previous month.

Corporate news has been light save for some analyst upgrades and downgrades.

Commodities are mixed with oil and gold prices little changed near $94 and $1240, respectively.

The 10-year yield is lower to 2.96%, easing back from its spike above 3.0% last week.

Asian markets were lower overnight after a disappointing PMI reading out of China.  The HSBC Services PMI fell to 50.9 from 52.5.  Also, Moody's warned that the high local government debt levels in China poses risks to the stability efforts of the central government.

European markets are little changed.  The Eurozone Services PMI held steady at 51.0.  Separately, the Bank of England governor plans to introduce changes to the BoE's forward guidance by reducing the unemployment target to 6.5% from 7.0%.

Despite the reversal in stocks, the volatility index is roughly flat so far near the 13.80 level.  This should pickup if the selling intensifies.

Trading comment: Still feels like the market is tired and more of a pullback is in store.  We don't get the sense the often discussed 10% pullback is upon us, but investors are still in profit taking mode, the market is just coming off overbought levels, and the pressure to add to equities just isn't there yet.  The S&P 500 recently broke out above the 1810-1815 area before it sprinted to new highs.  So that former resistance could become initial support on a pullback back near those levels.  Currently the SPX sits near 1825.  Patience.

Thursday, January 02, 2014

Pent-up Selling Starts The New Year

The markets are getting off to a weak start in 2014, but this is not all that surprising.  December was a strong month for stocks, and we saw them levitate into year-end without any pullback.  That makes it likely investors were hesitant to take profits late in the year and were waiting for the calendar to turn so that they could defer another year of capital gains taxes.

So today you have than pent-up selling being unleashed.  But the selling appears orderly and there is no sort of panic in the air.  Volume levels are likely to remain below average as many participants remain on vacation this week.  So we should see normal healthy volume levels return next week.

In economic news, the December ISM Index fell to 57.0 from 57.3.

Commodities are mixed with gold prices bouncing to $1225 while oil prices are weaker near $96.40 after a Libyan field is expected to come back online which would increase supply.

Asian markets were mixed overnight, with Japan closed.  China's HSBC Manuf. PMI held steady at 50.5.  Singapore's GDP rose 4.4%.

Europe's markets hover near their lows.  Eurozone manuf PMI held steady at 52.7 with Spain getting over the 50 level (50.8) for the first time in many months.

The 10-year yield is hovering just below the 3.0% level.  Preferred stocks seem to be getting a small bounce from all the year-end selling.

Trading comment: The market is overbought and certainly due for a pullback.  But that doesn't mean the overdue 10% correction everyone is looking for is bound to occur this month.  We are still in a favorable seasonal period for stocks and there is still likely money being reallocated into the market.  It would surprise us to see a small pullback in the near-term followed by a return of dip buyers.  Trying to time a 10% correction in the market is extremely difficult to do for anyone, but our guess is that today is not the start of said correction.