February is usually one of the poorer months for stocks and according to Art Cashin, one of the best guests CNBC has on, mid-February is often when a pullback begins. Markets are fairly overbought right now. In the late December through today portion of that rally, it has been most everyone participating except last year’s darlings, the high-yield stocks. I wouldn’t sell them yet because they will do much better on any significant market pullback.
The stocks that have been leading are the banks. Usually the strongest stocks in the long-term bull market (2002-2007) that crashes (2008) lag the subsequent recovery, not lead it. That’s why some see the recent rally as just a small bull market in a longer term downtrend.
Gold is up slightly today and oil is up 2.5% today. Some of that certainly has to do with lingering tensions over Israel’s widely broadcast posturing over stopping Iran’s nuclear program and many are predicting some sort of war could start anytime. I am not so sure about that. Meanwhile things continue to be bad for living in Iran’s puppet state of Syria. I don’t see the revolutionaries being successful there anytime soon.
And then of course there is Greece. Sigh. There are rumors that the austerity package that the Eurozone finance ministers told Greece it had to pass and did this weekend may not in the end be enough to satisfy. Part of the reason for that is that the man likely to be the next prime minister of Greece is saying that this austerity package ought to be renegotiated after the upcoming election. Meanwhile, there were riots in Greece this weekend over the latest austerity package. Thirty buildings were burned.
The new turn to real skepticism by the Eurozone finance ministers is important. I think it marks the turning point in relations between the EU and Greece and if persists could spell real trouble for more Greek bailouts and Greece’s future as a full-fledged member of the European Union.