Friday, March 18, 2011

Stocks Rising into Final Hour on Short-Covering, Dividend Hikes, Stable Energy Priices, Japan Optimism

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Slightly Above Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 24.34 -7.55%
  • ISE Sentiment Index 90.0 -32.33%
  • Total Put/Call 1.16 -7.41%
  • NYSE Arms .78 +20.33%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.67 -3.19%
  • European Financial Sector CDS Index 102.76 -6.82%
  • Western Europe Sovereign Debt CDS Index 166.33 bps -2.16%
  • Emerging Market CDS Index 216.40 -2.73%
  • 2-Year Swap Spread 21.0 unch.
  • TED Spread 25.0 +2 bps
Economic Gauges:
  • 3-Month T-Bill Yield .06% -1 bp
  • Yield Curve 268.0 +3 bps
  • China Import Iron Ore Spot $164.70/Metric Tonne +.49%
  • Citi US Economic Surprise Index +63.30 -.5 point
  • 10-Year TIPS Spread 2.44% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -11 open in Japan
  • DAX Futures: Indicating +25 open in Germany
  • Slightly Higher: On gains in my Biotech and Medical longs
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is just mildly bullish as the S&P 500 trades near session lows, despite a bounce in Japanese equities, less eurozone debt angst, stable energy prices and recent stock losses. On the positive side, Tobacco, Airline, Homebuilding, I-Banking, Bank and Paper shares are especially strong, rising more than 1.0%. (XLF)/(IYR) have traded relatively well throughout the day. Cyclicals and small-caps are outperforming. Lumber is rising +1.54% and oil is just +.3% higher despite growing Mideast unrest. The Spain sovereign cds is falling -4.2% to 213.33 bps and the US sovereign cds is falling -3.2% to 42.29 bps. Moreover, the Saudi sovereign cds is falling -6.16% and the Israeli sovereign cds is declining -5.14% to 146.84 bps. On the negative side, Restaurant, Retail, Hospital, Networking, Semi, Oil Service, Alt Energy and Coal shares are down on the day. Growth stock leaders are relatively weak, as well. China Iron Ore Spot has declined -13.5% in about 1 month. Gold is rising +.94% and the UBS-Bloomberg Ag Spot Index is rising +2.78%. The avg. US price for a gallon of gas is -.01/gallon today to $3.54/gallon. It is up .42/gallon in 31 days. Action in the tech sector remains worrisome, notwithstanding the mild bounce over the last 2 days. The Networking subsector(Index:NWX) is especially weak as it breaks back below its 50-day moving average today. I still suspect that global growth is slowing more than economists perceive right now and that this is not factored into most stocks. Moreover, the supply disruptions, as a result of Japan, will likely become even more of a concern over the coming weeks. Even after the nuclear situation is remedied, rolling blackouts will likely crimp supplies for many months. Breadth and volume are a little better today, however triple-witching may be masking underlying weakness. I will closely monitor Monday's market reaction to the weekend's news before shifting market exposure further. I expect US stocks to trade mixed-to-lower into the close from current levels on growing Mideast unrest, tech sector worries, more shorting, profit-taking and technical selling.

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