Consolidating Near High Ground

The market bounced back yesterday but on lighter volume.  Today stocks are lower again, at least in the early part of the trading session.  This is somewhat typical of the action we have seen in recent weeks.

In economic news, the March Philly Fed survey came in above expectations at +2.0, which is a nice turnaround from last month's reading of -12.5.  But it is making this data series a bit lumpy.

Existing home sales for Feb. hit 4.98 million units, which is still higher than the previous month's rate of 4.94 million units.  But homebuilders are pulling back today after hitting new highs yesterday.

In earnings news, Oracle's results fell short of expectations and the stock is trading lower on mixed guidance.  Although all 10 S&P sectors are lower this morning, ORCL's results are weighing on the tech sector which is lagging all others so far.

Overnight, Asian markets were mixed.  Although Japan rallied to hit its best levels in more than 4 years.  China's HSBC manuf. PMI came in above consensus at 51.7.  And New Zealand's GDP rose better than expected 1.5%.

Europe's markets are lower today amid weak economic data.  The manuf. PMI readings for France and Germany were both below expectations and continue to show sub-50 readings (read: contraction).  The overall Eurozone PMI was also below expectations at 46.6 and down from the prior month's level of 47.9.

Also in Europe the Cyprus situation remains unresolved.  Russia is looking like it won't provide any loans and the Cypriot banks remain closed.

The dollar is flattish today and commodities are mixed again.  Ag prices are up a little as are precious metals.  Gold prices are higher to $1613.  Oil prices are down near $92.70.  And copper prices are lower again nearing 7-month lows. 

The decline in copper is not a good sign for those economists who believe copper is a good leading indicator for the economy.  If one is expecting a pickup in global growth, you would want to see copper prices steady or rising. 

The 10-year yield is flattish near 1.93%.  And the volatility index is up 4% to 13.21, still below that 15 level we have been watching.

Trading comment: Since breaking out on March 5th, the S&P 500 has rallied as high as 1560 and pulled back to find support near 1540.  Currently it is hovering right in the middle of that 20-point range at 1550.  Obviously a break in either direction would be telling for the market.  But the longer the market trades in this sideways choppy fashion the more likely it is that we see another breakout to new highs.  That has been the pattern for months now, and until we see a change in character for the market the playbook that has been working is to expect more of the same.