North American Investment Grade CDS Index 83.25 +1.30%
European Financial Sector CDS Index 142.50 bps +3.13%
Western Europe Sovereign Debt CDS Index 185.83 bps +3.34%
Emerging Market CDS Index 208.20 +2.91%
2-Year Swap Spread 20.0 +1 bp
TED Spread 15.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .14% -1 bp
Yield Curve 281.0 +2 bps
China Import Iron Ore Spot $185.60/Metric Tonne unch.
Citi US Economic Surprise Index +33.40 -9.4 points
10-Year TIPS Spread 2.25% -2 bps
Overseas Futures:
Nikkei Futures: Indicating +52 open in Japan
DAX Futures: Indicating +15 open in Germany
Portfolio:
Higher: On gains in my Retail, Ag and Tech long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs, despite recent equity gains, Japan's debt downgrade and worries over emerging markets inflation/riots. On the positive side, Road&Rail, Retail, REIT, HMO, I-Banking, Bank, Wireless, Internet and Defense shares are especially strong, rising more than 1.0% today. Cyclical shares are outperforming again. (IYR)/(XLF) are outperforming. Tech and Transport shares have also traded well throughout the day. Copper is rising +1.41% and lumber is rising +1.62%. US scrap steel prices have surged +14.3% over the last 5 days. The AAII % Bulls fell to 42.04 this week, while the % Bears rose to 34.29, which is a big positive. Oil and gold continue to trade very poorly considering recent positive economic data, equity gains, euro strength and rioting in the Middle-East. The 10-year yield is stable, falling -3 bps to 3.39%. On the negative side, Homebuilding, Construction, Telecom, Steel and Coal shares are under pressure, falling more than 1.0%. The UK sovereign cds is climbing +5.35% to 68.16 bps, the Belgium sovereign cds is rising +3.78% to 181.34 bps and the Japan sovereign cds is rising +2.69% to 81.64 bps. The UBS-Bloomberg Spot Ag Index is rising another +.51% to a new record high. US stocks continue to trade very well considering recent potential negative catalysts. The major averages are consolidating recent gains around key technical levels, which is a big positive. Moreover, various investor sentiment gauges are registering meaningful declines in bullishness, which is also a big positive. Any meaningful break above current technical levels in the major averages should lead to another wave of short-covering. (MSFT) just reported earnings early and the stock is rising into the close. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, buyout speculation, falling energy prices, less financial/real estate sector pessimism and technical buying.
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