Friday, March 11, 2011

Stocks Rising into Final Hour on Lower Energy Prices, Euro Bounce, Short-Covering, Fund Inflows

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 20.21 -7.63%
  • ISE Sentiment Index 102.0 +70.0%
  • Total Put/Call 1.11 +6.73%
  • NYSE Arms .45 -79.59%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.75 +1.17%
  • European Financial Sector CDS Index 124.92 +1.31%
  • Western Europe Sovereign Debt CDS Index 182.33 bps +1.25%
  • Emerging Market CDS Index 213.61 -.49%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 24.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .07% unch.
  • Yield Curve 277.0 +4 bps
  • China Import Iron Ore Spot $167.40/Metric Tonne -1.93%
  • Citi US Economic Surprise Index +68.30 -6.6 points
  • 10-Year TIPS Spread 2.47% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -274 open in Japan
  • DAX Futures: Indicating +18 open in Germany
  • Higher: On gains in my Tech, Retail, Biotech and Medical longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short, then added some back
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs after reversing morning losses, despite the Japan disaster, Mideast unrest, eurozone debt angst, yesterday's technical damage, emerging market inflation fears and some weak US economic data. On the positive side, Road & Rail, REITs, Construction, Networking, Paper, Steel, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than 1.5%. Cyclicals are outperforming. (IYR) has traded well throughout the day. The UBS-Bloomberg Ag Spot Index is down -1.24%, oil is down -1.47%, lumber is +.4% and copper is rising +.7%. The Belgium sovereign cds is falling -2.08% to 164.83 bps and the Italy sovereign cds is falling -2.11% to 179.0 bps. On the negative side, Telecom, Alt Energy and Restaurant shares are lower on the day. Tech is underperforming again. The Portugal sovereign cds is rising +1.96% to 516.83 bps, the US sovereign cds is climbing +2.3% to 44.50 bps and the Saudi sovereign cds is gaining +2.59% to 129.55 bps. The European Financial Sector CDS Index is rising again, which remains a negative. The avg. US price for a gallon of gas is up +.01/gallon today to $3.54/gallon. It is up .42/gallon in 22 days. Oil continues to trade poorly, which is a large positive. I still believe the commodity has likely seen another significant top barring any actual supply disruptions from a significant OPEC producer. Some key market leading stocks are bouncing strongly off their 50-day moving averages. While today's reversal is noteworthy, volume is poor and breadth is lacking. I would like to see better technical action early next week before further increasing market exposure. I expect US stocks to trade mixed-to-higher into the close from current levels on falling energy prices, fund inflows, short-covering, bargain-hunting, technical buying and a bounce in the euro.

1 comment:

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