Tuesday Tidings

Sorry this post is a little later than normal today.  I had to fulfill my parental duties and take my kids to school for their first day of the new year.  Markets are down in morning trade following weakness in overseas markets.

Asian markets were lower overnight after the HSBC PMI data for China over the weekend slumped to a 3-year low of 47.6.  China's stock index was lower overnight and fell to a 3 1/2 year low.  In Australia, the Reserve Bank held rates steady at 3.50% and reiterated its outlook for slowing China growth to weigh on natural resource prices.

In Europe, markets were also lower after PMI readings in Germany, France, and Italy came in below preliminary readings.  Also, Moody's cut its outlook on the EU region to 'negative' from 'stable', which brings into question how long countries like German, UK, France, and Netherlands can maintain their AAA ratings. 

Spanish bond yields were actually lower by 21 basis points earlier as speculation swirls that the ECB may be comfortable buying sovereign debt with maturities up to 3 years.  Global markets are all anxiously awaiting ECB's rate decision and comments on Thursday.

In the US, the August ISM index came in below estimates at 49.6 vs. July's reading of 49.8.

In corporate news, Netflix (NFLX) stocks is lower after Amazon (AMZN) announced a new instant video agreement with EPIX as Amazon takes aim at Netflix's core business.

The dollar has strengthened since the open this morning, and commodities are mixed.  Oil prices are lower, below $95.50, while gold prices remain higher near the $1700 level.  Silver continues to trade well also.

The 10-year yield has fallen back below its 50-day support and is currently near 1.59%.  And the VIX is 6% higher currently to the 18.50 level. 

Trading comment: The markets are struggling this morning to hang on to recent support levels.  It is still early, but the action in the SPX looks like it wants to pullback more.  We'll have to see how the market closes today and how volume levels come in.  I also think that markets could merely chop around until we hear from the ECB and then we could see a bigger move.  So we haven't really changed our recent asset allocations.  We are still underweight equities overall and fairly conservative in our portfolios.

KAM Advisors has long positions in AMZN