Monday Morning Musings

The market is slightly lower in early trading, but once again the selling doesn't feel like it has much bite.  On Friday the markets broke out of their recent trading range with the S&P 500 moving to new highs on the year.  Those waiting for a deeper pullback continue to be frustrated as this stair-step market continues.

There hasn't been a lot of market moving news this morning, with no big economic releases.  Asian markets were mostly closed for the holiday.  Japan, Hong Kong and China were all closed for trading.  Australia and India were open and finished slightly lower.

Core European markets are higher today but peripheral countries like Spain and Italy are not participating.  Germany auctioned off 6-month bills at a yield of 0.02%.  This was actually the first auction with a positive yield since June of last year.  Crazy.

The dollar is lower this morning, but most commodities are selling off.  Some traders are citing the EU looking to force Cypress debt holders to take losses in a bailout.  Oil prices are fairly steady near $95.75 but gold prices are falling back to $1650.

The 10-year yield is up fractionally to 1.96%.  And the volatility index is flat near the 13.0 level.

Trading comment: The market continues to trade in a benign fashion with mild 1-2 day pullbacks followed by rallies that push the indexes to new highs.  This can be a frustrating pattern for underinvested managers who dont' want to chase the market and await a larger pullback.  More of the investor sentiment indicators are flashing caution signals as bullish sentiment climbs to levels that in the past have preceded a correction.  But sentiment indicators are not the best timing indicators, meaning that bullish sentiment could persist for a while as the market continues to climb and pull in hesitant cash from the sidelines.  We would not chase stocks that are extended on the charts, but think that fresh breakouts could continue to work.