Tuesday, January 11, 2011

Stocks Slightly Higher into Final Hour on European Equity Strength, Commodity Rebound, More Economic Optimism

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.19 -2.0%
  • ISE Sentiment Index 162.0 +11.72%
  • Total Put/Call .83 +7.79%
  • NYSE Arms .82 -35.13%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.28 -4.25%
  • European Financial Sector CDS Index 176.42 bps -4.61%
  • Western Europe Sovereign Debt CDS Index 215.75 bps -.80%
  • Emerging Market CDS Index 204.17 -1.32%
  • 2-Year Swap Spread 25.0 -1 bp
  • TED Spread 16.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .14% +1 bp
  • Yield Curve 276.0 +3 bps
  • China Import Iron Ore Spot $174.60/Metric Tonne +.69%
  • Citi US Economic Surprise Index +36.70 +.9 point
  • 10-Year TIPS Spread 2.40% +5 bps
Overseas Futures:
  • Nikkei Futures: Indicating +75 open in Japan
  • DAX Futures: Indicating +8 open in Germany
  • Slightly Higher: On gains in my Medical, Biotech, Ag and Tech long positions
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades just slightly higher despite some meaningful equity strength overseas and less euro sovereign debt angst. On the positive side, Education, Homebuilding, Construction, Hospital, Medical Equipment, Steel, Oil Service, Energy and Coal shares are especially strong, rising more than 1.0%. Copper is gaining +1.95%. The Italy sovereign cds is falling -5.07% to 244.08 bps, the Russia sovereign cds is declining -3.31% to 145.78 bps and the US Muni CDS Index is falling -5.76% to 228.25 bps. On the negative side, Airline, Gaming, Telecom and Oil Tanker shares are under meaningful pressure, falling more than 1.0%. (IYR) has underperformed throughout the day. As well, the Transports are giving back some of their recent gains. Weekly retail sales rose +2.8% this week, which is a meaningful deceleration from last week's +3.6% gain. The Bloomberg Cars Anchored Index(.CARANCH Index) is breaking out technically, which means demand from dealers is waning, leaving more autos at port on anchored vessels. The 10-year yield is rising +6 bps to 3.34%. Lumber is falling -2.85% and is down -10.9% over the last week. The Japan sovereign cds is soaring +7.23% to 81.54 bps, which is the highest level since July 21st of last year. The Euro Financial Sector CDS Index is pulling back today, but is still near its all-time high of 200.80 bps, set May 7th of last year. The Western Europe Sovereign CDS Index is just slightly below its record high set yesterday and the euro currency continues to trade poorly despite today's strong showing by eurozone equity markets. Investor sentiment gauges are still registering too much short-term complacency, which is also a negative. The bears still show no ability to gain meaningful traction despite potential negative catalysts, which is a major positive. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt worries, more shorting, earnings concerns and profit-taking.

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