Wednesday, July 07, 2010

Stocks Sharply Higher into Final Hour on Less Real Estate Sector Pessimism, Diminishing Economic Fear, Short-Covering, Bargain-Hunting

Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 27.45 -7.42%
  • ISE Sentiment Index 97.0 +10.23%
  • Total Put/Call .86 -23.21%
  • NYSE Arms .29 -62.73%
Credit Investor Angst:
  • North American Investment Grade CDS Index 119.81 bps -.83%
  • European Financial Sector CDS Index 137.53 bps +1.33%
  • Western Europe Sovereign Debt CDS Index 147.50 bps -1.67%
  • Emerging Market CDS Index 264.60 bps -3.01%
  • 2-Year Swap Spread 32.0 -4 bps
  • TED Spread 38.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .15% -1 bp
  • Yield Curve 237.0 +5 bps
  • China Import Iron Ore Spot $126.60/Metric Tonne -1.09%
  • Citi US Economic Surprise Index -20.80 -.3 point
  • 10-Year TIPS Spread 1.73% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +231 open in Japan
  • DAX Futures: Indicating +20 open in Germany
  • Higher: On gains in my Biotech, Medical, Technology and Retail long positions
  • Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short, added to my (ISRG) long
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades substantially higher, as it pushes to session highs this afternoon. On the positive side, Airline, REIT, Bank, Semi, Computer, Coal, Disk Drive and Oil Service stocks are especially strong, rising 4.0%+. Cyclicals are outperforming today. (IYR) trades much better, rising +4.66%. (XLF) also trades well, rising +4.0%. Copper is rising another +1.77%. The S&P GSCI Ag Spot Index is jumping another +3.0% today to 315.68 and is now close to its 200-day moving average at 319.50. Weekly retail sales remain firm, rising +3.0% versus a +3.0% gain the prior week. The 10-year yield is rising +5 bps to session highs, which is also a positive at this point. On the negative side, Telecom, Drug, Biotech, HMO and Hospital shares are underperforming, rising less than 1.5%. Despite improvements in some gauges of European credit angst, three-month euro Libor is rising another +.19 basis point today to another multi-month high of 74.19 bps. The TED spread has also been trending higher again over the last few days. China Import Iron Ore Spot prices continue to decline. Weekly retail sales have held up well even as retail stocks have been crushed over the last few months. This could be one of the better performing groups during the upcoming earnings season. The broad market has likely begun a short-term move higher. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less real estate sector pessimism, bargain-hunting and diminishing economic fear.


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Sales are lousy, most all this year. Those retail sales numbers you see have survivor bias and all sorts of flaws.


Gary said...