North American Investment Grade CDS Index 90.50 +.63%
European Financial Sector CDS Index 87.92 +4.14%
Western Europe Sovereign Debt CDS Index 186.58 +.36%
Emerging Market CDS Index 206.26 +2.42%
2-Year Swap Spread 18.0 +1 bp
TED Spread 26.0 unch.
Economic Gauges:
3-Month T-Bill Yield .00% -2 bps
Yield Curve 258.0 -5 bps
China Import Iron Ore Spot $182.50/Metric Tonne -.44%
Citi US Economic Surprise Index -26.70 -6.4 points
10-Year TIPS Spread 2.48% -7 bps
Overseas Futures:
Nikkei Futures: Indicating -300 open in Japan
DAX Futures: Indicating -8 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical/Retail sector longs, ETF hedges and emerging market shorts
Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades at session lows despite falling energy/food prices, a stronger dollar and lower long-term rates. On the positive side, Defense, Oil Tanker, Semi, Networking, Hospital, HMO, Gaming, Education, Road & Rail and Airline shares are higher on the day. Small-caps are outperforming. The US dollar looks to have made a tradable low. The UBS-Bloomberg Ag Spot Index is falling -2.34%, gold is down -3.1% and oil is plunging -9.2%. Silver has crashed about -28% in 6 days. The 10-year yield is falling -6 bps to 3.16%. The US Muni CDS Index is is falling -2.4% to 122.88 bps. The AAII % Bulls fell to 35.46 this week, while the % Bears rose to 31.87, which is a mild positive. On the negative side, Coal, Energy, Oil Service, Telecom, Bank and Insurance shares are under significant pressure, falling more than -1.5%. Commodity-related equities have traded very heavy throughout the day again. The US price for a gallon of gas is rising .01/gallon today to $3.99/gallon. It is up .87/gallon in 79 days. Lumber is falling another -.6% and has plunged around -28.0% in just over 2 months. Copper is dropping -3.83% and is sitting right below its 200-day moving average. The Spain sovereign cds is jumping +4.37% to 236.56 bps, the Italy sovereign cds is climbing +3.69% to 149.33 bps, the Greece sovereign cds is surging +8.2% to 1,389.96 bps, the Belgium sovereign cds is gaining +3.07% to 139.83 bps and the UK sovereign cds is rising +3.95% to 58.33 bps. Moreover, the Illinois Municipal CDS is soaring +15.91% to 190.0 bps. I continue to believe the global economy is slowing more than economists expect on soaring food/energy prices, US housing, European austerity, central bank tightening in emerging markets and the Japan nuclear crisis. The huge declines in commodities and rise in the US dollar today, while a short-term broad market negative, should help provide the catalyst for further stock gains later this year if the trends continue as long as global growth doesn't slow too much. Usually, leadership changes are messy and more forced selling is likely over the coming weeks as many funds were heavily-weighted long commodity-related securities. I expect US stocks to trade mixed-to-lower into the close from current levels on profit taking, more shorting, technical selling, global growth concerns, Mideast unrest, commodity sector weakness and emerging markets inflation fears.
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