Wednesday, December 01, 2010

Stocks Surging into Final Hour on Less Euro Debt Angst, Diminishing Economic Fear, Seasonal Strength, Short-Covering

Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Slightly Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 21.17 -10.07%
  • ISE Sentiment Index 145.0 +42.16%
  • Total Put/Call .82 -6.79%
  • NYSE Arms .26 -70.48%
Credit Investor Angst:
  • North American Investment Grade CDS Index 96.25 bps -2.68%
  • European Financial Sector CDS Index 138.10 bps -1.65%
  • Western Europe Sovereign Debt CDS Index 193.50 bps -.85%
  • Emerging Market CDS Index 231.95 bps -4.01%
  • 2-Year Swap Spread 27.0 -2 bps
  • TED Spread 15.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 244.0 +9 bps
  • China Import Iron Ore Spot $167.80/Metric Tonne unch.
  • Citi US Economic Surprise Index +21.70 -.7 point
  • 10-Year TIPS Spread 2.16% +7 basis points
Overseas Futures:
  • Nikkei Futures: Indicating +197 open in Japan
  • DAX Futures: Indicating +15 open in Germany
  • Higher: On gains in my Biotech, Medical, Retail, Ag and Technology long positions
  • Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short, added back to my (MOS) long
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades substantially higher despite ongoing eurozone debt concerns and China inflation worries. On the positive side, Homebuilding, Semi, Software, Coal, Energy, Oil Service, Steel, Gaming, Construction and Defense shares are especially strong, rising more than 2.75%. Cyclical shares are outperforming. (BAC), which has been a big drag on (XLF), is rebounding 3% to session highs. Copper is rising +2.93%, lumber is jumping +2.31% and the S&P GSCI Ag Spot Index is surging +4.23%. The US Scrap Steel Index is rising another +2.93%. The Spain sovereign cds is plunging -12.64% to 318.56 bps, the Italy sovereign cds is dropping -13.7% to 231.05 bps, the Portugal sovereign cds is falling -12.18% to 474.30 bps and the Ireland sovereign cds is falling -7.76% to 563.37 bps. On the negative side, Education and REIT shares are underperforming. The Greece sovereign cds is rising +.64% to 980.48 bps. The 10-year yield is surging +17 bps to 2.97%. The broad market continues to remain resilient, with mild pullbacks on negative news and huge jumps on good news. Headlines out of Europe tomorrow will dominate trading again. If eurozone debt angst falls again, global equities should build on today's rally tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on falling eurozone sovereign debt angst, declining economic fear, seasonal strength, investment manager performance angst, short-covering, bargain-hunting and technical buying.

No comments: