Friday, December 10, 2010

Stocks Rising into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Technical Buying, Short-Covering

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.37 +.70%
  • ISE Sentiment Index 254.0 +22.12%
  • Total Put/Call .77 +11.59%
  • NYSE Arms .56 +10.08%
Credit Investor Angst:
  • North American Investment Grade CDS Index 88.21 bps -.35%
  • European Financial Sector CDS Index 146.43 bps +7.08%
  • Western Europe Sovereign Debt CDS Index 185.50 bps +3.34%
  • Emerging Market CDS Index 212.96 bps -.47%
  • 2-Year Swap Spread 23.0 +4 bps
  • TED Spread 19.0 +2 bps
Economic Gauges:
  • 3-Month T-Bill Yield .11% -2 bps
  • Yield Curve 268.0 +9 bps
  • China Import Iron Ore Spot $165.70/Metric Tonne +.18%
  • Citi US Economic Surprise Index +1.70 +15.7 points
  • 10-Year TIPS Spread 2.18% +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating +50 open in Japan
  • DAX Futures: Indicating +7 open in Germany
  • Higher: On gains in my Biotech, Tech, Ag and Medical long positions
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades higher despite recent equity gains, rising eurozone debt angst, China inflation worries, US tax policy uncertainty and US municipal debt concerns. On the positive side, Defense, Coal, Alt Energy, Steel, Software, Disk Drive, Networking, Telecom, Medical Equipment, Biotech, Hospital, HMO, Construction, Homebuilding, REIT and Education shares are especially strong, rising more than 1.0%. Cyclicals and small-caps are outperforming again. (XLF)/(IYR) have traded well throughout the day. Lumber is rising +.32% and copper is gaining +.59%. On the negative side, Gaming, Semi and Oil Tanker shares are slightly lower on the day. The Italy sovereign cds is climbing +6.45% to 219.14 bps and the Portugal sovereign cds is rising +4.25% to 468.25 bps. The European Financial Sector CDS Index continues to trend higher(still below May/June levels) and the US Muni CDS Index is rising another +5.58% to 219.08 bps. Despite a number of potential negative equity catalysts, the S&P 500 has broken out convincingly to a new 52-week high, which is a major positive and bodes well for further near-term gains into year-end. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, short-covering, diminishing financial sector pessimism, buyout speculation, technical buying, investment manager performance angst and seasonal strength.

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