Wednesday, November 11, 2009

Stocks Rising into Final Hour on Housing Optimism, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is rising +.88% and is high at 23.06. The ISE Sentiment Index is around average at 150.0 and the total put/call is above average at .93. Finally, the NYSE Arms has been running about average most of the day, hitting .96 at its intraday peak, and is currently .93. The Euro Financial Sector Credit Default Swap Index is falling -2.89% today to 65.48 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling -.89% to 98.0 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is up +1 basis point to 22 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is down -.76% to 32.63 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +2 basis points to 2.23%, which is down -42 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is down -1 basis point today. Market leading stocks are strongly outperforming again today. As well, the Transports are sharply outperforming, rising 1.74%. (XHB) has traded very well throughout the day and is boosting the entire market as it breaks back above its 50-day moving-average. Today’s gains are better than the major averages suggest, with a number of sectors posting 1%+ gains. The market ran into some technical resistance this morning after the S&P 500 penetrated the 1,100 level, however the bears have once again been unable to gain any meaningful traction. I expect the S&P 500 to break convincingly higher through this short-term resistance by week’s end. Nikkei futures indicate an +70 open in Japan and DAX futures indicate an +6 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, investment manager performance anxiety, technical buying and stable long-term rates.

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