Cautious, But Still Optimistic

Stocks are still on an uptrend and the eight-month rally in the markets is still in tact. But investors are getting more cautious after the S&P 500 suffered its most significant correction on a weekly percentage basis since last May.

In a story by Barron’s, 60% of investment managers responding to a survey by the online magazine said they continue to be bullish about the market’s prospects through the middle of 2010. But about 80% of those surveyed said they think stocks are currently fairly valued or expensive.

Should the market continue its correction, 46% of the managers say cash is the best hiding place, while 27% prefer Treasuries and 16% prefer gold.

For more context, see Josh Lipton’s Why the Lagging Transports Are Worrying.

From the Bull Pen: Regarding the Transports, bulls wanting to test the upside might see a good risk/reward bet. One can use the ETF (IYT); a tight sell stop can be set below $64 support.

From the Bear Cave: Dow theorists believe if the transports do fail, the broader indices will like go along with it. One strategy could be to enter the Ultrashort S&P 500 (SDS), if and when the “trannies” do fail. But remember to set your sell stop.

A Quick Check Around the World

Asian trading closed with the Nikkei -2.31%, India -0.97%, Hang Seng -0.61%, Shanghai 2.70%, and Taiwan -0.07%.

Across the pond, we see the FTSE 0.55%, CAC 0.52%, DAX 0.16%,

As of 8:20 a.m. EST, S&P Futures are trading +5.00 to 1038.00 and Nasdaq futures are +2.750 to 1668.25.

A Look at Commodities

Over in commodities, crude oil is +0.60 to 77.60 while gold is +12.8 to 1053.20 this morning. Silver is +29.5 to 1655.0 and copper +0.350 to 295.90.

The dollar Index is -0.1100 to 76.3650.

On the Radar

Economics

10:00 Construction Spending -0.4% cons.
10:00 ISM Index 53.0 cons.
10:00 Pending Homes Sales 0.4% cons.

Click here for the full trading radar.

Welcome back! Good luck!