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.
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