Thursday, April 07, 2011

Stocks Slightly Lower into Final Hour on Rising Energy Prices, New Japan Concerns, Profit-Taking, Eurozone Debt Angst

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 17.36 +2.66%
  • ISE Sentiment Index 94.0 -36.49%
  • Total Put/Call .90 +30.43%
  • NYSE Arms .97 +20.62%
Credit Investor Angst:
  • North American Investment Grade CDS Index 93.80 +1.18%
  • European Financial Sector CDS Index 90.48 +13.06%
  • Western Europe Sovereign Debt CDS Index 161.83 bps -.53%
  • Emerging Market CDS Index 198.33 -.34%
  • 2-Year Swap Spread 18.0 +1 bp
  • TED Spread 25.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .04% -1 bp
  • Yield Curve 276.0 +6 bps
  • China Import Iron Ore Spot $179.50/Metric Tonne +1.93%
  • Citi US Economic Surprise Index +34.50 -.1 point
  • 10-Year TIPS Spread 2.59% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -85 open in Japan
  • DAX Futures: Indicating +42 open in Germany
  • Slightly Higher: On gains in my Medical and Retail sector longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just slightly lower despite Mideast unrest, rising energy prices, government shutdown concerns, new Japan worries, eurozone debt angst and recent equity gains. On the positive side, Retail, Homebuilding, Medical, Education, Software, Steel and Oil Tanker shares are higher on the day. Tech shares are outperforming. Copper is rising another +1.0%. The Japan sovereign cds is falling -2.3% to 87.11 bps. On the negative side, Airline, Gaming, Restaurant, REIT, Semi and Paper shares are under pressure, falling more than -1.0%. Cyclicals are underperforming again. Oil is up +1.5% and Lumber is falling another -3.34%. Lumber is down about -15% in 10 days. Violence between Israel and Hamas is heating up, which is likely contributing to oil's surge today despite euro weakness and new Japan concerns. The upcoming Nigerian elections are also a factor. Oil continues to trade well, which is a major negative for the broad market. The US price for a gallon of gas is up +.02 today to $3.73/gallon. It is up .61/gallon in 51 days. The Spain sovereign cds is up +1.3% to 203.88 bps, the Greece sovereign cds is up +4.3% to 1,040.36 bps, the Russia sovereign cds is rising +1.6% to 124.17 bps, the UK sovereign cds is gaining +3.4% to 49.12 bps and the US sovereign cds is jumping +13.1% to 40.93 bps. The Greece sovereign cds is now only 34 bps from its record high. The AAII % Bulls rose to 43.59, while the % Bears fell to 28.85, which is also a negative. US stocks remain extraordinarily resilient given mounting headwinds. However, market leadership is still lacking and trading remains choppy with lackluster breadth/volume during this latest move higher. One of my longs, (ISRG), is moving +1.7% higher today. The stock is extended short-term, however the shares will likely take out their all time high at $394 over the coming months. As well, I still see substantial upside in the stock from current levels over the longer-term. I expect US stocks to trade mixed-to-lower into the close from current levels on rising energy prices, Mideast unrest, profit-taking, eurozone debt angst and new Japan concerns.

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