Consumer Sentiment Remains Surprisingly High

Our markets are only slightly higher this morning.  Actually the large-cap indexes are higher but the mid- and small-cap indexes are still in the red.

The surprising piece of economic data this morning was the Univ. of Mich. Sentiment survey, which showed that consumer sentiment rose to 83.1 in October from 78.5 last month.  That reading is the best level we've seen since September 2007.  Let's hope the aftermath of this peak bears little resemblance to that prior period.

In corporate news, two big banks reported earnings this morning.  JPMorgan and Wells Fargo both exceeded analyst expectations but their stocks are trading lower today.

On the plus side, JB Hunt (JBHT) beat earnings and is trading higher, while another miss from INFY is hitting that stock.

Asian markets were mixed overnight.  There are continued rumors of a rate cut in China from the PBOC but nothing official.  China reported an 11% decrease in new bank loans during September.

European markets are lower today as Spain remains unwilling to request a bailout.  Reports suggest the holdup is due to the uncertainty about what type of contingencies the ECB would require.

The euro is higher again at the expense of the dollar, but it doesn't seem to be helping commodities today.  Gold prices are lower to $1765 and oil prices are down near $91.90.  Silver and copper prices are lower as well. 

The 10-year yield is lower again to 1.65% after a downside reversal yesterday that took it back below its 50-day average.  The volatility index is basically flat on the day near the 15.60 level.

Trading comment: The last 2 days bounce in the market has felt pretty weak to put it nicely.  The S&P 500 is currently testing its 50-day support, with several of the other indexes already below those levels.  So it feels to me like this pullback still has some more room to run.  Distribution days (high volume selloffs) have piled up lately which is usually a red flag.  I still expect the market to have another rally sometime this quarter, but I want to be patient about putting cash to work at these levels.