12:55pm (EST) 

The Dow is seeing some selling pressure ahead of today’s government auction of $21 billion in 10-year notes which is about to get going.  Bond yields have been rising in recent weeks, which have pushed interest rates higher and the bears like that.  Wall Street will tell you the market usually dips when rates are on the rise and maybe we are seeing a little of that but we doubt the bulls just throw in the towel.

The yield on the benchmark 10-year Treasury note, which moves opposite to its price, rose to 3.97% on Tuesday after climbing above 4% for only the second time since October 2008 on Monday.  The 10-year note is used as a benchmark for many consumer loans including mortgages.

The Dow has been stuck below the psychological barrier of 11,000 and came within 12 points both Monday and Tuesday of breaking through.  It really is just a number in the scheme of things but the index hasn’t crossed that level in 18 months.

As we do our update, the Dow is lower by 41 points to 10,928 but has come off its lows.  The S&P 500 is off by 3 points to 1,186 while the Nasdaq is down a point to 2,435.

We haven’t talked about the VIX (CBOE Market Volatility Index, 16.52, up $0.29) in awhile but the index hit a fresh multi-year low on Tuesday.  The VIX has not closed below 16 since July, 2007 and for those of you just joining us here is the deal.

The VIX measures “fear” on Wall Street and is one indicator we like to follow to try and get a read on the market.  For our new subscribers, high readings mean that Wall Street is nervous and bearish.  A low reading indicates calm and the Street is bullish.  The VIX has traded as high as 45 to its recent low of 16 over the past year but we called for the VIX to trade to 15 back on March 9th:

“It doesn’t mean any rally will stop if the VIX hits these levels, and in fact, we are looking for the VIX to trade below 15 if we can get a market breakout.”

Folks, we are close to reaching all of the targets we have set for the Dow, the S&P 500, the Nasdaq, and the VIX which means even we are starting to get a little cautious. 

We still think the market can rally for a few more weeks and maybe first quarter earnings will be the catalyst to give us that last big push before the market fades but at some point the market will get a haircut.

One sector rallying today is Solar.  These stocks are often volatile, which is good if you are an option trader, and we have been watching the activity closely.  First Solar (FSLR, $124.18, up $3.65), Canadian Solar (CSIQ, $25.54, up $1.13), JA Solar (JASO, $6.13, up $0.46) and Suntech Power (STP, $14.75, up $0.75) are all showing 3%-5% gains.

We’ve got one of those names in our current portfolio and we have been mentioning we expect a breakout.  Subscribers, check the Members Area for the updates.