The rally in stocks has stalled. The major averages are churning sideways and we're seeing similar sideways movement in crude oil and the U.S. dollar. Short-term the market is overbought but this morning's lackluster earnings data was not enough to spark any serious profit taking. Meanwhile banks are showing strength and the homebuilders are some of the best performers thanks to better than expected new home sales data.

The rally in Asian markets continued on Monday. Investors are ignoring data that's showing Japan slipping deeper and deeper into deflation. The Japanese NIKKEI index gained 1.4% marking its 9th gain in a row. This is the NIKKEI's best string of wins in the last 21 years. The Hong Kong Hang Seng rose 1.3% for its third gain in a row. The Chinese Shanghai index climbed 1.8% for its 4th gain in and closed at new 14-month highs.

Over in Europe the rally returned. On Friday most of the major indices snapped an eight-day winning streak. Today European markets started off the session strong and faded lower only to rebound from late-session declines to close fractionally higher. Energy, miners and material stocks led the session's gains. The English FTSE, up 0.2%, delivered its best run in several years with its 11th gain in a row. The German DAX rose 0.4%. The French CAC-40 inched up 0.18%.

Here at home the new home sales data was overshadowing the earnings parade. Economists were expecting a June new home sales pace of 360,000 units. The Commerce Department announced June's new home sales came in at a 384,000 pace and revised May's up to 346,000. This marks the third month in a row that sales have increased and June's 11% surge is the biggest rise since December 2000. The sales pace may be picking up but prices continue to fall as homebuilders struggle to compete with rising foreclosures. The median home price came in at $206,000 down from $219,000 in May and $234,00 in June 2008. Another positive note was the drop in inventory levels, which fell to 11-year lows at 281,000 units. The DJUSHB home construction index is up more than 3% on the news today.

Second quarter earnings have generally been better than expected. Today's headline numbers were bruised by more than one company offering a bearish forecast and lowering their earnings guidance. Dow-component Honeywell (HON) reported earnings that were line with the 60-cent estimate but management said 2009 would remain tough and the company lowered estimates to the bottom of their previous range. Meanwhile healthcare giant Aetna (AET) missed Wall Street's estimates by 10 cents and guided their earnings numbers lower by a substantial amount. Analysts' 2009 estimates for AET were at $3.53 a share. AET now expects to earn between $2.75-2.90 a share. The stock is down 4.7% at $25.20. Telecom titan Verizon (VZ) reported earnings that were inline with estimates at .63 a share. VZ's management said they will continue to cut costs in their landline business and would slash 8,000 jobs over the next six months.

Looking ahead investors will be keeping an eye on bond yields. Yields could trend higher this week as the U.S. tries to sell an astonishing $235 billion in various treasury notes. The previous one-week record was $104 billion back in June. The first major auction is this afternoon with $6 billion in 20-year inflation-indexed securities. Currently the yield on the 10-year bond is about 3.72%, which is a new four-week high.

Currently the S&P 500 index is off less than five points as it hovers around the 975 level. The Dow Industrials are off about 52 points and nearing the 9040 level. The NASDAQ composite is down about 14 points near 1952. The Russell 2000 index is only down 2 points at 546.50.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

Glancing at the OptionInvestor.com play list I am not seeing a lot of movement with the market drifting sideways. ORLY is seeing some profit taking and hit our stop loss under $40.00. Put play CMP looks like it's about to roll over again. GENZ also looks like it might be making a new entry point to buy puts. The strength in the financials has fueled a 3% rally in WABC and the stock hit our stop loss above resistance at $50.00.