10 Year Rates Over 200 Sma

The yield on the 10 year has soared over the last few days as stocks have rallied and several fed officials have made very hawkish comments. Rates have now rallied from 3.45 to over 4.10 on the 10 year, a very significant move. Although they may continue to plough higher, I think it makes sense to take profits around this level.

Cover XLF

XLF is probably near a short term low as it approaches the 24.50 support level. Given that it has fallen from over 28 bucks to 24.64 in such a short period, I think it's a bit oversold and would look to cover any XLF short positions here.

DPS

Buy DPS (Dr. Pepper Snapple)

DPS's products are all staples with solid brand names that will continue to sell even in the face of a slowdown. Forced selling due to the stock's spin off from Cadburry has depressed the stock price in the near term leading to an opportunity to get long the stock. DPS sells at only a 13 PE while its peers (KO and PEP) sell at a 18 PE. This is a very wide disparity that should close soon enough. Although DPS does not have the international exposure of KO and PEP, the gap between valuations more than compensates for this.

I think that 25 dollars is a very reasonable price to get long the stock given the factors above.

XLF

Short XLF - The XLF was driven below its 50 sma, a level that has provided support over the past week or so, on news of Wachovia's reckless investments in a Citigroup hedge fund and estimate cuts for several investment banks. The XLF hasn't participated in the last part of the broad market rally and has looked relatively weak in past weeks. This action shows that banks (except USB, GS) still have no credibility and are in a good position to be sold off. Bad news was good news for a while, but sentiment has turned after a strong rally to the 200 sma has worn out and consolidation/pullback has become more likely. Given this shift, I don't think people will be willing to step into the weakest sector this early into a pullback giving the etf more downside from here.

Traderfeed and More

Dr. Steenbarger is waiting on several indicators to peak before calling an end to this rally. You can read his indicator review here.

Insider buying in Etrade indicates confidence in a turnaround from management. See here.

Quantifiable Edges has a hard time finding anything that would suggest we move higher near term.

Risk appetite grows as shown by Blackrock's purchase of subprime.

Also, another interesting blog I've found can be seen here.

Reality v. Gov't Data

I've posted three links that call into question the most recent CPI data. You can find them here, here, and here.

Start Selling ISRG

Sell ISRG against its 50 sma. ISRG got torched in April but found a low above its 200 sma. It has been treading higher since.