Tuesday, December 28, 2010

Stocks Rising Slightly Into Final Hour on Seasonal Strength, Short-Covering, Investor Performance Angst


Broad Market Tone:

  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Mixed
  • Volume: Light
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.88 +1.19%
  • ISE Sentiment Index 162.0 +33.88%
  • Total Put/Call .78 +1.30%
  • NYSE Arms .81 -16.80%
Credit Investor Angst:
  • North American Investment Grade CDS Index 85.68 -.37%
  • European Financial Sector CDS Index 152.41 bps -.04%
  • Western Europe Sovereign Debt CDS Index 192.75 bps -1.74%
  • Emerging Market CDS Index 206.51 +.14%
  • 2-Year Swap Spread 19.0 -3 bps
  • TED Spread 16.0 -2 bps
Economic Gauges:
  • 3-Month T-Bill Yield .14% +2 bps
  • Yield Curve 273.0 +5 bps
  • China Import Iron Ore Spot $170.70/Metric Tonne unch.
  • Citi US Economic Surprise Index +6.50 -5.4 points
  • 10-Year TIPS Spread 2.31% +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +48 open in Japan
  • DAX Futures: Indicating +19 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Medical, Tech, Retail and Ag 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 slightly higher despite recent stock gains, China inflation worries, soaring long-term rates and some disappointing economic data. On the positive side, Bank, Energy, I-Banking, Medical Equipment and Drug shares are especially strong, rising more than .5%. (IYR) is trading very well again today. Copper is climbing +.99% despite the Chinese rate hike, some weaker economic data and declining euro. Moreover, the S&P GSCI Ag Spot Index is rising another +1.25% to another new record high. The TED and 2-year swap spreads have been trending lower over the last week, which is a big positive. On the negative side, Education, Oil Tanker, Homebuilding, Hospital, Gaming, Disk Drive and Steel shares are under mild pressure, falling more than .5%. The Greece sovereign cds is climbing +1.69% to 1,053.52 bps and the Emerging Markets Sovereign CDS Index is jumping +3.07% to 198.l20 bps. The Euro Financial Sector CDS Index remains at the highest level since mid-June and the Western Europe Sovereign CDS Index remains very near its record high set last month, which is also a big negative. Gold is surging +1.64% and the 10-year yield is soaring +14 bps to 3.47%. The Shanghai Composite continues to trade poorly, breaking down through its 200-day moving average overnight. The broad market continues to display exceptional resiliency as most negatives are ignored. Today's broad market action is another healthy consolidation of recent gains. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, short-covering, technical buying, buyout speculation and investment manager performance angst.

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