Wednesday, March 23, 2011

Stocks Reversing Higher into Final Hour on Short-Covering, Bargain-Hunting, Global Economic Optimism

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 18.72 -7.37%
  • ISE Sentiment Index 68.0 -44.72%
  • Total Put/Call .89 +17.11%
  • NYSE Arms 1.05 -30.93%
Credit Investor Angst:
  • North American Investment Grade CDS Index 97.32 +.84%
  • European Financial Sector CDS Index 106.96 +2.75%
  • Western Europe Sovereign Debt CDS Index 170.08 bps +1.19%
  • Emerging Market CDS Index 212.54 -2.14%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 22.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .09% unch.
  • Yield Curve 269.0 +1 bp
  • China Import Iron Ore Spot $165.50/Metric Tonne +.67%
  • Citi US Economic Surprise Index +57.8 -3.2 points
  • 10-Year TIPS Spread 2.39% unch.
Overseas Futures:
  • Nikkei Futures: Indicating +41 open in Japan
  • DAX Futures: Indicating +26 open in Germany
  • Higher: On gains in my Biotech, Tech, Retail and Medical longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 reverses morning losses and trades at session highs, despite rising energy prices, US housing worries, growing Mideast unrest, Japan concerns and rising eurozone debt angst. On the positive side, Restaurant, Networking, Disk Drive, Semi and Coal shares are especially strong, rising 1.5%+. Cyclicals are outperforming. Copper is jumping +2.94% and the UBS-Bloomberg Spot Ag Index is dropping -1.26%. On the negative side, Road & Rail, REIT, Insurance, Bank and Oil Tanker shares are under some pressure, falling more than .5%. (IYR)/(XLF) have underperformed throughout the day. The Transports also aren't participating in today's rally. Oil is rising +.64% and lumber is falling -.57%. The avg. US price for a gallon of gas is unch. today at $3.55/gallon. It is up .43/gallon in 36 days. The Portugal sovereign cds is climbing +2.63% to 531.55 bps, the Greece sovereign cds is surging +3.3% to 993.43 bps and the Ireland sovereign cds is gaining +5.11% to 616.17 bps. The Citi Eurozone Economic Surprise Index is falling again to -12.80 today and is now at the lowest since March 23rd of last year. The Japan sovereign cds is gaining +4.12% to 103.0 bps, the Saudi sovereign cds is rising +3.56% to 128.16 bps and the Israeli sovereign cdss is rising +3.9% to 153.61 bps. The market's resilience in the face of numerous mounting headwinds remains very impressive. However, volume, leadership and breadth are poor given the extent of the recent rally. The S&P 500 is still right near its 50-day moving average. If the benchmark can break convincingly above this level I will feel more comfortable with additional market exposure. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, economic optimism and bargain-hunting.

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