Thursday, November 11, 2010

Stocks Lower into Final Hour on Tech Sector Weakness, Profit-Taking, Eurozone Debt Fears


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 18.55 +.38%
  • ISE Sentiment Index 132.0 -1.49%
  • Total Put/Call .73 +4.29%
  • NYSE Arms .89 +28.07%
Credit Investor Angst:
  • North American Investment Grade CDS Index 90.37 bps -1.77%
  • European Financial Sector CDS Index 117.66 bps +4.89%
  • Western Europe Sovereign Debt CDS Index 174.33 bps +1.06%
  • Emerging Market CDS Index 204.18 bps unch.
  • 2-Year Swap Spread 30.0 +8 bps
  • TED Spread 16.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .12% unch.
  • Yield Curve 222.0 -1 bp
  • China Import Iron Ore Spot $161.0/Metric Tonne +.44%
  • Citi US Economic Surprise Index +35.90 -.2 point
  • 10-Year TIPS Spread 2.14% +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -16 open in Japan
  • DAX Futures: Indicating +23 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Tech and Medical long positions
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades well off session lows despite recent sharp equity gains, overseas equity weakness, tech sector earnings worries and rising euro sovereign debt angst. On the positive side, Airline, Gaming, Restaurant, Homebuilding, Construction, Hospital, Biotech, Gold, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than .50%. Small-Cap and cyclical shares are outperforming. The Transportation Index is also slightly higher on the day. Copper is rising +1.55% despite euro weakness. Lumber is also rising +.69%. On the negative side, Networking, Semi, Computer, Internet and Defense shares are under pressure, falling more than 1.0%. Shanghai copper inventories are surging another +9.35% today and are now at the highest level since late May, rising +24.2% in 5 days. The Portugal sovereign cds is gaining +3.53% to 483.0 bps. The Emerging Markets Sovereign Debt CDS Index is jumping 9.7% to 199.25 bps. Moreover, other key global cds indices continue to surge higher, which is a large negative. As well, the 2-year Swap spread has broken out technically, which is also a negative. Stocks remain very resilient despite today headline losses as the bears remain unable to gain significant traction. An unusual number of stocks are gaining on good volume today given the losses in the major averages and overall stock/sector breadth isn't bad. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, seasonal strength and technical buying.

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