Wednesday, March 30, 2011

Stocks Rising into Final Hour on Buyout Speculation, More Economic Optimism, Lower Energy Prices, Technical Buying

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 17.54 -3.41%
  • ISE Sentiment Index 98.0 -19.01%
  • Total Put/Call .73 -1.35%
  • NYSE Arms .68 -32.02%
Credit Investor Angst:
  • North American Investment Grade CDS Index 95.92 -.23%
  • European Financial Sector CDS Index 99.92 +5.33%
  • Western Europe Sovereign Debt CDS Index 167.58 bps -.10%
  • Emerging Market CDS Index 206.64 -.88%
  • 2-Year Swap Spread 17.0 unch.
  • TED Spread 21.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .09% unch.
  • Yield Curve 265.0 -1 bp
  • China Import Iron Ore Spot $170.50/Metric Tonne +1.19%
  • Citi US Economic Surprise Index +44.40 -1.7 points
  • 10-Year TIPS Spread 2.45% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +112 open in Japan
  • DAX Futures: Indicating +24 open in Germany
  • Higher: On gains in my Tech, Retail, Biotech and Medical longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 builds on recent gains, despite rising Mideast unrest, US housing worries, emerging market inflation fears, more hawkish Fed commentary, eurozone debt angst and Japan concerns. On the positive side, Education, Gaming, Construction, HMO, Hospital, Biotech, Paper, Oil Tanker and Telecom shares are especially strong, rising 1.75%+. (XLF) and (IYR) have traded well throughout the day. Small-caps and cyclicals are outperforming again. Oil is falling -.45%. The Japan sovereign cds is falling -1.93% to 97.08 bps, the Brazil sovereign cds is declining -2.01% to 113.0 bps and the Israeli sovereign cds is down -1.57% to 151.76 bps. The fact that the 10-year yield is falling 4 bps to session lows, despite more economic optimism and additional supply is noteworthy. On the negative side, Homebuilder, Oil Service and Road & Rail shares are lower on the day. Lumber is falling -1.01% and copper is down -1.67%. The US price for a gallon of gas is unch. today at $3.59/gallon. It is up .47/gallon in 43 days. The Ireland sovereign cds is rising +2.01%, the Greece sovereign cds is rising +1.43% to 996.67 bps and the Portugal sovereign cds is rising +.99% to 572.23 bps. The Shanghai Composite has not participated in the global equity rally over the last few days. Quarter-end window dressing and expectations for a strong jobs report on Friday are aiding the bulls again today. One of my longs, (VRX), is hitting a new multi-year high today on volume after announcing their intent to acquire (CEPH). While the stock is overbought short-term, I still see substantial upside in the shares over the longer-term. Another one of my longs, (AAPL), is lagging again today on estimate cuts. The stock has been consolidating huge gains since the bear market lows, over the last few months, in an orderly fashion. For the first time in awhile expectations are coming in ahead of a quarterly report. The stock is becoming more attractive in the short-term as a result, in my opinion. I still see tremendous upside in the shares from current levels over the long-term. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, more economic optimism, window-dressing and buyout speculation.


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