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Premarket Musings, 6-11-2012

Over the weekend I tried to write my weekly analysis, a couple of different times, but it just wasn't happening. Sometimes writing is like that. So I worked on the car some, tinkered with electronic gadgets, mowed the lawn, spent a day out and about with Mrs. Simple Accountant.

That's not to say I wasn't looking at the markets and the economic news and data. Here are some thoughts ahead of the Monday morning open:

The bounce last week was encouraging, but I am remaining cautious. Asian markets rallied in Monday trading and European and UK markets are up as I write. Futures in the U.S. are pointing higher. Not saying I think the bounce is a sucker's rally, just that it's too early to go long.

In last weekend's article I wrote that we are likely to see a choppy summer market, lots of whipsaw action. That's a fine environment for traders but we tend to take longer positions and I think there are lower entry points ahead.

Bond yields backed up - that was one of the more predictable moves we've seen in a while, but the 10 year note saw resistance at 1.7%, which was a bottom/support back in Q4 of 2011. Super low Treasury yields look like they will be with us for quite a while. That doesn't say good things about prospects for the economy.

The Spanish bailout was announced over the weekend, and was also predictable in two regards: that it happened at all, and that it was completely inadequate relative to the size of the problem. It's so obviously inadequate that one has to wonder whether there is some other agenda. As I write, Spanish and Italian yields are running up.

Commodities look like they are putting in a short term bottom. Whether it proves to be a longer term bottom remains to be seen, but there is a lot of technical damage here. Buying at this point is quite speculative.

The euro is seeing a little bit of a bounce of its own. I would fade any rally. We could see the dollar index come back to test 81.5 or even 80.5, but again, longer term I think the dollar goes higher - much higher.

To summarize: with the dollar pulling back and risk assets rallying, there could be some good short term trades (there's always a trade somewhere), but the larger market environment remains unsettled. Long term investors are better served by taking a patient approach.

Good luck to everyone!

Harry