Thursday, August 12, 2010

Stocks Lower into Final Hour on Rising Economic Fear, Tech Sector Worries, China Concerns

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 25.53 +.55%
  • ISE Sentiment Index 117.0 -12.03%
  • Total Put/Call 1.02 -4.57%
  • NYSE Arms 1.14 -80.18%
Credit Investor Angst:
  • North American Investment Grade CDS Index 110.62 bps +1.94%
  • European Financial Sector CDS Index 119.22 bps +4.04%
  • Western Europe Sovereign Debt CDS Index 136.33 bps +1.0%
  • Emerging Market CDS Index 226.08 bps +2.45%
  • 2-Year Swap Spread 19.0 +2 bps
  • TED Spread 23.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .14% unch.
  • Yield Curve 219.0 +1 bp
  • China Import Iron Ore Spot $148.30/Metric Tonne +.47%
  • Citi US Economic Surprise Index -56.1 -1.1 points
  • 10-Year TIPS Spread 1.68% -8 bps
Overseas Futures:
  • Nikkei Futures: Indicating -17 open in Japan
  • DAX Futures: Indicating +8 open in Germany
  • Higher: On gains in my Biotech and Ag long positions
  • Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges and then added them back
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 is trading near session highs despite more disappointing economic data, a weaker euro and tech sector worries. On the positive side, Airline, Gaming, Drug, Biotech, Telecom, Paper, Gold, Ag, Oil Tanker and Coal stocks are especially strong, rising .75%+. Despite today's disappointing jobs data, the 10-year yield is rising +6 bps to session highs and copper is rising +.8%. Moreover, the S&P GSCI Ag Spot Index is jumping another +3.02%. The Spain sovereign cds is falling -5.46% to 200.95 bps. On the negative side, Networking, Disk Drive, Computer and Internet shares are especially weak, falling 2.25%+. (IYR) has also underperformed throughout the day. The ongoing rise in eurozone credit default swaps is a major negative. Moreover, the action in the tech sector is very poor. I will closely monitor the bond market's reaction to tomorrow's likely weaker-than-expected consumer confidence reading before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, tech sector concerns, rising economic fear and China worries.

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