The market is slightly higher in early trading. Yesterday, the market was down quite a bit, but a big late day rally brought the major indexes all the way back into positive territory. This is a good initial sign, and possibly the beginning of a bottoming process. But we need to see the market find further support.
Also, the volatility index (VIX) is down -6.0% right now, but still at high absolute levels around 29.0. The VIX also spiked higher yesterday, reaching the 35 level, but reversed hard to close lower on the day. The VIX closed around the 26 level at the February bottom, so I would like to see the VIX come down a little from current levels to get me more bullish.
There were a few good earnings reports this morning from blue chips like Wal-Mart (WMT) and Home Depot (HD), and also a couple of solid economic reports. Housing starts rose +5.8%, above consensus estimates. And the PPI for April showed a -0.1% decrease when a slight gain was expected.
Looking at the macro picture, the Euro is bouncing further, which is holding back the dollar. This is helping commodities bounce, with oil bouncing +2.5% to $71.85. Gold is trading down, falling to $1215.
Asian markets rose overnight, with China bouncing back +1.4% amid reports the govt. may hold off on further tightening measures due to uncertainties in the global economic outlook.
The 10-year yield is lower to 3.43%.
Trading comment: Yesterday's late day rally was a nice start, but we need to see the market continue to find support. That doesn't mean we can't have a down day again here and there, but it means I don't want to see the SPX or Nazz undercut yesterday's lows. Additionally, I would be looking for a follow-thru day where the market has a big rally on above-average volume.
In the meantime, I am continuing to watch those stocks that are holding up the best during this correction. That is often a good indicator of which ones will rally the quickest when the market stabilizes.
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