Monday Morning Musings

There are no US economic reports this morning which has left the markets to take their cue from overseas.  The big news around the globe this morning is the Italian elections.  Stocks opened higher amid indications that Pier Bersani's party would be victorious.  But as conflicting reports began to surface, the markets early gains began to fade.

This can be seen most clearly in the Italy ETF (EWI).  It opened 4% higher this morning but has since reversed all the way down to a 1.1% loss so far.  The Dow and S&P 500 also opened in positive territory but as of now have given up those gains and are trading near the flat line.

Europe's markets were all higher this morning but are more mixed as Berlusconi makes headway in the Italian polls.  After the close on Friday, Moody's downgraded the UK from its 'AAA' rating.

Asian markets were higher across the board overnight, led by a 2.4% gain in Japan.  China rose 0.5% despite its HSBC Manuf. Indiex missing estimates and coming in at 50.4, a four-month low.

The dollar is still lower today, and commodities are mixed.  Oil prices are flat near $93.10 while gold prices are bouncing a little to $1585.

The 10-year yield is flat near 1.96%.  And the volatility index was lower earlier but is currently nearly 2% higher to 14.45.

Trading comment: If the market gives up its gains today and closes in the lower half of the day's range, it's likely a good indication that the market needs some more time to consolidate its recent months of gains.  The same comments could apply to lots of stocks that have risen a lot lately and appear extended in price.  I think some consolidation would be healthy for the market here, and provide a sturdier base for further gains.  This week is the last week of trading for February with March starting on Friday.  Looking back at market history, March is one of the more volatile months and the prospect of a correction would not be all that surprising.  Especially if bullish sentiment remains overly complacent in the weeks ahead.