Wednesday, January 26, 2011

Stocks Rising Into Final Hour on More Economic Optimism, Short-Covering, Strong Earnings, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.74 -4.89%
  • ISE Sentiment Index 124.0 +19.23%
  • Total Put/Call .95 -1.04%
  • NYSE Arms 1.07 -36.61%
Credit Investor Angst:
  • North American Investment Grade CDS Index 82.18 -1.20%
  • European Financial Sector CDS Index 139.67 bps +3.46%
  • Western Europe Sovereign Debt CDS Index 179.83 bps +1.12%
  • Emerging Market CDS Index 203.09 +.07%
  • 2-Year Swap Spread 19.0 -3 bps
  • TED Spread 15.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 279.0 +5 bps
  • China Import Iron Ore Spot $185.60/Metric Tonne +.11%
  • Citi US Economic Surprise Index +42.80 +.6 point
  • 10-Year TIPS Spread 2.27% +4 bps
Overseas Futures:
  • Nikkei Futures: Indicating +63 open in Japan
  • DAX Futures: Indicating +25 open in Germany
  • Higher: On gains in my Retail, Ag, Tech, Biotech 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 near session highs, despite recent equity gains, rising long-term rates, worries over emerging markets inflation and financial sector relative weakness. On the positive side, Education, Airline, Construction, HMO, Disk Drive, Networking, Steel, Ag, Oil Service, Energy and Coal shares are especially strong, rising more than 2.0% today. Small-cap and Cyclical shares are substantially outperforming. Copper is rising +1.44%. The US Muni CDS Index is dropping -3.69% to 196.0 bps. The Citi US Economic Surprise Index is now at the highest level since April 12th of last year. On the negative side, Utility, Bank, Restaurant and Food shares are under mild pressure, falling more than .5%. (XLF) has underperformed again throughout the day. The UBS-Bloomberg Spot Ag Index is rising another +1.87% to a new record high and rough rice futures are jumping +3.02%. The 10-year yield is surging +9 bps to 3.42%. The Emerging Markets Sovereign CDS Index is rising +3.05% to 191.36 bps. The DJIA appears to be consolidating recent gains around 12,000, which is a positive. The Russell 2000 is bouncing strongly off its 50-day moving-average, which is also a positive. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, more economic optimism, strong earnings and technical buying.

1 comment:

theyenguy said...

I appreciate your blog; lots of great reporting here; but I see some things different than you.

You relate: The Russell 2000 is bouncing strongly off its 50-day moving-average, which is also a positive.

No, it is not a positive ... it is a prime opportunity to go short the 200% of the Russell 2000, URTY.

In my linked article Stock Market Top Is Being Achieved As US Treasuries Turn Lower And As Gold Stocks Break Out where I give clear, cogent and convincing evidence that January 26, 2011 was the short selling opportunity of a lifetime.

Having said that I do not own a brokerage account. As I have shared before I am not concerned about the return on my investment but instead the return of my investment -- I could never and will never leave my investments anywhere they might be seized.

The gold mining stocks, GDX, which were turned lower by the flattening 30:10 Yield Curve, $TYX:$TNX, and the terrific fall lower in the 30 Year US Government bond, EDV, rose 3.8%, with stocks today.

It is likely that gold, GLD, will rise now having found support. And it is reasonable that the gold mining stocks, and junior gold mining stocks, GDXJ, will rise some as well. The loss of US Central Bank seigniorage caused disinvestment from the gold mining stocks, as can be seen in the fall of the ratio of the HUI Precious Metal Stocks relative to the 30 Year US Government bonds, $HUI:$USB, beginning in mid December 2010. But now a rally in this metric is likely, as gold and gold mining stocks are likely to rally. The ratio of gold mining stocks relative to gold, GDX:GLD, manifested a rebound today; and gold mining stocks such as Agnico Eagle Mines, AEM, ASA Limited, ASA, Goldfield, GFI, and Newmont, NEM rose. An astute swing trader could see this coming in the chart of Newmont Mining which is in an Elliott Wave 3 up today.