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