Once again, the market is strong in early trading. But most of the time lately, when the market has been strong in the morning, we have seen it fade by the closing bell. Is this a new trend? If so, you can bet that traders will continue to try to capitalize on it for as long as it works.
There was another solid housing report this morning, with pending home sales rising +6.0% in April, above expectations. Pending home sales are up 24.6% from the year-ago period.
But the dour news out of Europe continues. All of the European bourses are lower this morning, after reports that Spain's large bank Caja Madrid has asked for funds from the govt. The continued financial strains in Europe are also weighing on the euro again, which is back to 4-year lows.
The low euro is boosting the dollar. Oil is hovering near $73, and gold is slightly lower to $1216. Bonds are also higher again, pushing the yield on the 10-year down to 3.27%. The flight to safety remains, and that means Treasuries, the dollar, and gold.
The volatility index (VIX) is down -6.2% to 33.34, but I would still like to see it get below the 30 level to indicate that the markets are calming.
Trading comment: Yesterday's action was disappointing. The S&P is still churning below its 200-day average, but above its recent lows. The market is also still very oversold, and bearish sentiment has risen a lot lately. This keeps the door open for another rally at some point. But we certainly have not seen any action that makes me want to get aggressive. A defensive posture still seems appropriate in here.
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