The Relief Rally Continues

The market is up again in early trading.  There isn't really any concrete news that would account for the strength we are seeing.  Rather, it seems that investors were too cautious last week as they prepared for the weekend, and that fear trade is being repealed over the last few sessions.

Asian markets eased back overnight, but Europe is higher this morning as Spanish yields come down a little and the euro gets a bid vs. the dollar.  Oil prices are higher to $84.15, while gold prices are flat near $1626.  Silver prices are lower, but copper prices are higher.

In economic news, housing starts were slightly below expectations for May but building permits rose nicely with last month's figures seeing upward revisions.  The debate about whether or not the housing bottom is in continues.  I have no positions in the homebuilding stocks and no desire at the moment.

In earnings news, both FDX and ORCL reported last night and both stocks are higher today.

The S&P 500 is breaking above its 50-day average today.  I had thought it might run into some resistance at this key overhead moving average, but such is not the case today.  Of course, we need to see the SPX hold above this average for more than just one day, so the reaction to tomorrow's FOMC announcement will be interesting.

The 10-year yield is slightly higher to 1.62%; and the VIX is lower again after a really big plunge yesterday.  The VIX is currently -2% lower below the 18 level.  I think this is an overshoot, but somewhat typical of what we see in the summer months.  I still think the VIX will offer a good upside trade in the near-term.

Trading comment: Last Monday the Dow opened higher and faded completely into the close.  It opened Tuesday morning near 12,400 with all the headlines about a potential Greek disaster.  A week later it is 450 points higher.  Famed trader Humphrey Neill said, "When everybody thinks alike, everyone is likely to be wrong."  This quote comes to mind when thinking how everyone likely got defensive ahead of the big weekend and quickly scrambled when they realized that they had gotten too cautious.  I myself am a bit guilty of this.  But as market leaders begin to emerge from their consolidation bases, there should be ample opportunities.