Climbing The Wall of Worry

I'm getting a late start today as I had to take the kids to school this morning, which cuts into market hours when you're on west coast time.  Unfortunately I am on drop-off duty for the rest of the week as well.  So my morning comments are likely to be truncated for the remainder of the week.

Stocks added to their weekly gains yesterday with a nice rally that came on rising volume.  No real progress has been made on the fiscal cliff talks, but the market continues to climb the proverbial wally of worry.  I remain concerned that we could either get a 'sell the news' reaction to some hastily crafted deal, or a sharper sell off if no deal is reached. 

The volatility index is popping 6% this morning to 16.52, so there are some traders who are expecting an increase in volatility in the market near-term. 

Two recent earnings reports from FedEx and Oracle (ORCL) are both being greeted with enthusiasm this morning as the stocks gapped higher.  Both beat earnings and revenue estimates, but in the case of FDX the company lowered next quarter's forecast.

Gold prices continue to pullback, and are now close to the 200-day moving average.  In this environment of printing money gold should continue to do well longer-term, but it doesn't go up in a straight line and these sort of pullbacks serve to shake out the weak holders.

Asian markets rose overnight led by a +2.4% spike in Japan.  China was flat.  And European markets are higher following an upbeat German business climate index reading.  Additionally, industrial production data in Spain and Italy both surpassed expectations.  The euro is higher again today.

The 10-year yield is pulling back from yesterday's spike, and sitting near the 1.80% level.

More stocks are starting to breakout, which adds to the notion of the market strengthening and continuing to climb the wall of worry.  But in this environment risk management remains important.