Thursday, December 03, 2009
Stocks Lower into Final Hour on Financial Sector Pessimism, Profit-Taking, More Shorting
Posted by Gary .....at 3:08 PM
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is about even, sector performance is mixed and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is neutral. The VIX is rising +2.56% and is high at 21.65. The ISE Sentiment Index is below average at 114.0 and the total put/call is slightly below average at .78. Finally, the NYSE Arms has been running above average most of the day, hitting 1.41 at its intraday peak, and is currently 1.21. The Euro Financial Sector Credit Default Swap Index is falling -1.94% to 71.99 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 -1.61% 100.08 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is unch. at 22 basis points. The TED spread is now down 444 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +6.42% to 36.25 basis points. The Libor-OIS spread is unch. at 11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is +2 basis points to 2.20%, which is down -45 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is unch. today. Given today’s news, the major averages are holding up relatively well so far. Tech stocks are outperforming today. Airline, Hospital, Telecom, Semi and Utility shares are all substantially outperforming, rising .5%+. CDS indices are falling again, which is a big positive. On the negative side, (XLF) has traded poorly since the open. Besides financials, healthcare and energy-related shares are particularly weak. I will wait and see the market’s internal reaction to tomorrow’s likely better economic data before shifting market exposure. Nikkei futures indicate a -12 open in Japan and DAX futures indicate an +10 open in Germany on tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, financial sector pessimism and profit-taking.