Stocks rally as VIX hits 16 month low

Dow started the day strong & remained near that level for the balance of the day. But it was not able to take out its 2009 high. Dow rose 50, advancers over decliners 3-2 & NAZ shot up 15 to another 2009 high. NAZ is up an impressive 650 YTD (42% against a 20% gain for the Dow). Banks rose but the Financial Index can't get far away from the low end of its current trading range. Citigroup (C) is representative of the sideways trading pattern which has kept the Financial Index from advancing in recent months.


S&P 500 FINANCIALS INDEX

Value 194.79

Change 0.59

% Change 0.3%

Citigroup --- 1 year





MLPs & REITs hit new 2009 highs today. But the MLP index has pretty much gone straight up since the lows in Mar while the REIT had to work hard to break out from its 4 month trading range. Today the Alerian MLP Index was up 1½ to the 282s (& up 106 YTD) while the REIT Index gained almost 2 to 183. Junk bond funds were strong taking them to or near yearly highs while Treasuries are selling off in a major way. The yield on the 10-year Treasury bond shot up another 6 basis points to 3.74% bringing it near its 4% high for 2009. Much of its current weakness is related to the stronger dollar. The VIX graph below shows how far the VIX (Volatility Index) has fallen. The last time it was this low was Aug 2008, telling us that risk is welcome & being rewarded.


Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




VIX --- 2 months




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Oil rebounded & looks like it wants to get back over 75, its former floor. Gold is lost for the time being. The prospects of higher interest rates in the US are keeping gold buyers away. A strong dollar encourages investors to seek safety in the dollar, not gold. However these are trends which come & go.

CLG10.NYM

..Crude Oil Feb 10

..74.30

.. 0.58 ......(0.8%)

GCZ09.CMX

..Gold Dec 09

..1,084.20

.. 11.20 ......(1.0%)

GLD (ETF) --- YTD





Bulls continue in charge of the markets. Stocks want to go higher, there is a greater tolerance for risk. But this week the gains for Dow are only ordinary. The Dow chart shows it's been bumping its head against the 10½K ceiling for 2 months but failed to break thru. Perhaps the bulls can push it up in a meaningful way with a year end rally. Meanwhile S&P 500 inched up to a new yearly high while techs have brought more impressive gains to the NAZ.


Dow Jones Industrials --- 2 months




S&P 500 --- 2 months




Nasdaq --- 2 months