Tuesday, November 09, 2010

Stocks Falling into Final Hour on Eurozone Debt Worries, Rising Global Economic Fear, Profit-Taking, Real Estate Sector Worries


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: About Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 18.39 +.55%
  • ISE Sentiment Index 104.0 -32.90%
  • Total Put/Call .80 +14.29%
  • NYSE Arms 1.27 +30.51%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.49 bps -.87%
  • European Financial Sector CDS Index 107.0 bps -.69%
  • Western Europe Sovereign Debt CDS Index 171.50 bps +.29%
  • Emerging Market CDS Index 200.90 bps +3.30%
  • 2-Year Swap Spread 20.0 +2 bps
  • TED Spread 17.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .11% unch.
  • Yield Curve 222.0 +7 bps
  • China Import Iron Ore Spot $158.30/Metric Tonne +.70%
  • Citi US Economic Surprise Index +32.60 unch.
  • 10-Year TIPS Spread 2.13% +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +90 open in Japan
  • DAX Futures: Indicating -8 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Retail and Biotech long positions
  • Disclosed Trades: Added (IWM), (QQQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows despite gains in overseas equities and a decline in the Ireland sovereign cds. On the positive side, Ag, Medical Equipment and Education shares are higher on the day. The Ireland sovereign cds is dropping -4.40% to 571.08 bps and the US sovereign cds is declining -4.69% to 42.28 bps. The 10-year yield is rising +12 bps to 2.67%. Copper is rising +.9% and Lumber is gaining +.73%. Weekly retail sales rose +2.6% this week versus a +2.6% gain the prior week. On the negative side, Airline, REIT, Homebuilding, Gold, Oil Tanker and Coal shares are under meaningful pressure, falling more than 2.0%. Cyclical and small-cap shares are underperforming. (XLF)/(IYR) are trading heavy again today. Shanghai copper inventories are now at the highest level since early June. As well, LME Copper Canceled Warrants have been trending lower since early Sept., which is a negative. Key global cds indices are maintaining recent gains, which is a large negative. The divergence between the US/Eurozone Economic Surprise Indices, rising eurzone sovereign debt worries and overly bullish trader expectations regarding the euro currency are providing the catalysts for more euro weakness. The -4.08% decline in (IYR) is troubling and should be monitored closely. I suspect the major averages have made another short-term top. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, eurozone sovereign debt worries, rising global economic fear, more shorting and real estate sector worries.

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