Tuesday, October 26, 2010

Stocks Slightly Lower into Final Hour on Profit-Taking, More Shorting

Broad Market Tone:

  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Most Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 20.73 +4.43%
  • ISE Sentiment Index 80.0 -28.57%
  • Total Put/Call .90 -2.17%
  • NYSE Arms .86 +4.23%
Credit Investor Angst:
  • North American Investment Grade CDS Index 93.52 bps +.20%
  • European Financial Sector CDS Index 90.50 bps -3.35%
  • Western Europe Sovereign Debt CDS Index 138.50 bps -.30%
  • Emerging Market CDS Index 204.54 bps +.66%
  • 2-Year Swap Spread 17.0 unch.
  • TED Spread 17.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .12% +1 bp
  • Yield Curve 225.0 +5 bps
  • China Import Iron Ore Spot $149.90/Metric Tonne +.33%
  • Citi US Economic Surprise Index -3.70 +.2 point
  • 10-Year TIPS Spread 2.19% +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +53 open in Japan
  • DAX Futures: Indicating +16 open in Germany
  • Higher: On gains in my Tech, Ag and Retail long positions
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs despite recent sharp gains, mixed economic data and US dollar strength. On the positive side, Airline, Gaming, Disk Drive, Software and Oil Service shares are especially strong, rising 1.0%+. "Growth" shares are also outperforming "value" shares again. Copper is rising +.3% and the S&P GSCI Ag Spot Index is rising +.88%. Weekly retail sales rose +2.7% this week versus a +2.6% gain the prior week. The 10-year yield is rising +8 bps to 2.64%. The ongoing trend lower in key credit default swap indices remains a large positive. On the negative side, Education, HMO and Computer Hardware shares are under pressure, falling more than 1.0%. The Greece sovereign cds is rising +1.87% to 689.75 bps and the Russia sovereign cds is rising +2.15% to 142.56 bps. The broad market is consolidating recent gains again on below average volume, which is healthy. Select stocks continue to massively outperform the major averages on good volume, as well. One of my longs, (MOS), is hitting another 52-week high today on above-average volume. I still see meaningful upside in the shares from current levels. I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, diminishing sovereign debt angst, less economic fear, short-covering, buyout speculation, investment manager performance angst, less financial sector pessimism and earnings optimism.

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