Wednesday, November 10, 2010

Stocks Reversing Higher into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Short-Covering


Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 18.83 -1.31%
  • ISE Sentiment Index 133.0 +29.13%
  • Total Put/Call .72 -14.29%
  • NYSE Arms .73 -50.19%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.0 bps +6.37%
  • European Financial Sector CDS Index 113.50 bps +7.10%
  • Western Europe Sovereign Debt CDS Index 172.50 bps +.58%
  • Emerging Market CDS Index 203.72 bps +1.73%
  • 2-Year Swap Spread 22.0 +2 bps
  • TED Spread 16.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .12% +1 bp
  • Yield Curve 223.0 +1 bp
  • China Import Iron Ore Spot $160.30/Metric Tonne +1.26%
  • Citi US Economic Surprise Index +36.10 +3.5 points
  • 10-Year TIPS Spread 2.11% -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +45 open in Japan
  • DAX Futures: Indicating +39 open in Germany
Portfolio:
  • Higher: On gains in my Tech and Biotech long positions
  • Disclosed Trades: Covered all of my (IWM), (QQQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite recent sharp equity gains, losses in overseas equities today and rising euro sovereign debt angst. On the positive side, REIT, Restaurant, Road & Rail, Coal, Oil Tanker, Oil Service, Gold, Networking, Wireless, Bank, I-Banking, Hospital, HMO, Insurance and Construction shares are especially strong, rising more than 1.0%. (XLF)/(IYR) have traded well today, especially considering yesterday's losses. Small-Cap and cyclical shares are outperforming. Lumber is rising +1.02%. On the negative side, Gaming, Ag and Utility shares are under pressure, falling more than 1.0%. Copper is down -1.36%. Shanghai copper inventories are rising another +7.74% today and are now at the highest level since early June. The Spain sovereign cds is gaining +4.3% to 276.52 bps, the Ireland sovereign cds is rising +3.47% to 590.99 bps and the Portugal sovereign cds is gaining +2.0% to 466.40 bps. Moreover, key global cds indices continue to surge higher, which is a large negative. Stocks remain very resilient. However, these cds indices must reverse course soon to keep the recent global equity uptrend in tact. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, diminishing financial sector pessimism and technical buying.

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