Good Signs in Markets Today

Stock action looks seasonally typical: narrow trading range, relatively light volume.

But nothing is "typical" in this market.

It's a good sign that stocks are up in the past two days, and bonds and gold are weaker.

It is a GOOD SIGN that Treasurys and gold are both finally looking toppy. I mean, for heaven's sake, gold and the 10-year Treasury have moved in lock step all year...even going parabolic in the past month, as the S&P has tanked.

My mantra today: stocks are underowned, bonds are overowned, and gold...well, if it's not overowned, it is certainly way ahead of itself.

Either stocks are being permanently abandoned as an asset class, or there is an allocation opportunity here.

What about stocks? They're buying aggressively every time the S&P 500gets near 1125. The market has already priced in lower earnings numbers. Could it get worse? Sure, if a big European bank goes under, or we get a clear indication we are going to get a double dip...we could certainly drop another 10 to 20 percent.

But if neither of those events happen, this is definitely an opportunity. Most traders are timidly buying high-dividend utilities and defensive consumer staple names. They remain notably underweight financials and cyclicals.

And guess what? Financials have notably outperformed in the past two days.

_____________________________
Bookmark CNBC Data Pages:

_____________________________

Want updates whenever a Trader Talk blog is filed? Follow me on Twitter: twitter.com/BobPisani.

Questions? Comments? tradertalk@cnbc.com