Thursday, May 13, 2010

Stocks Lower into Final Hour on Profit-Taking, Rising Financial Sector Pessimism, Technical Selling, More Shorting


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 25.38 -.55%
  • ISE Sentiment Index 106.0 -8.62%
  • Total Put/Call .79 -8.14%
  • NYSE Arms 1.36 +68.39%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.98 bps +1.84%
  • European Financial Sector CDS Index 118.15 bps +7.86%
  • Western Europe Sovereign Debt CDS Index 106.66 bps -2.88%
  • Emerging Market CDS Index 233.83 bps +1.18%
  • 2-Year Swap Spread 30.0 +3 bps
  • TED Spread 28.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 271.0 +1 bp
  • China Import Iron Ore Spot $169.50/Metric Tonne -1.22%
  • Citi US Economic Surprise Index +13.90 -.5 point
  • 10-Year TIPS Spread 2.30% -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating -135 open in Japan
  • DAX Futures: Indicating -15 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Biotech, Retail and Technology long positions
  • Disclosed Trades: Added to my (IWM), (QQQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as equities trade near session lows this afternoon despite gains in most overseas markets. On the positive side, Oil Tanker and Food stocks are slightly higher. Sovereign debt angst is lower today with the Spain sovereign cds falling -2.46%, which is a positive. Oil is lower again on more euro weakness, rising supply and worries over China demand. Despite a calming of eurozone debt fears, the euro still trades very poorly and likely has further meaningful downside. On the negative side, Homebuilding, Semi, Disk Drive and Networking shares are under meaningful pressure, falling 2.0%+. Lumber prices have fallen -7.0% over the last five days. Some broad gauges of credit angst are moving higher again today. The eurozone investment grade cds index is jumping +6.5% today to 89.66 bps. As well, the California municipal cds is rising another +4.3% to 265 bps. The AAII % Bulls fell to 36.6 this week, while the % Bears rose to 36.6. Some gauges of investor angst are once again registering a bit too much complacency. The decline in the euro today is starting to take on a disorderly feel again and the S&P 500 failed again to break above its 50-day moving average. I will closely monitor Asia's reaction to our afternoon weakness tonight before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, more shorting, rising financial sector pessimism and technical selling.

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