Tuesday, June 14, 2011

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Euro Bounce, Diminishing Global Growth Worries


Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Every Sector Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 18.10 -7.70%
  • ISE Sentiment Index 168.0 +61.54%
  • Total Put/Call 1.04 -2.80%
  • NYSE Arms .60 -21.76%
Credit Investor Angst:
  • North American Investment Grade CDS Index 97.0 -1.77%
  • European Financial Sector CDS Index 115.50 -2.32%
  • Western Europe Sovereign Debt CDS Index 213.75 +1.02%
  • Emerging Market CDS Index 216.06 -2.95%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 20.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% +1 bp
  • Yield Curve 265.0 +6 bps
  • China Import Iron Ore Spot $172.80/Metric Tonne +.29%
  • Citi US Economic Surprise Index -95.40 +1.2 points
  • 10-Year TIPS Spread 2.25% +7 bps
Overseas Futures:
  • Nikkei Futures: Indicating +78 open in Japan
  • DAX Futures: Indicating +9 open in Germany
Portfolio:
  • Higher: On gains in my Retail, Biotech, Medical and Tech sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, covered some of my (EEM) short and then added back to my (IWM)/(QQQ) hedges
  • 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 despite global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns, rising energy prices and eurozone debt angst. On the positive side, Coal, Alt Energy, Oil Service, Computer, Disk Drive, Networking, Hospital, HMO and Construction shares are especially strong, rising more than +2.5%. Small-cap and cyclical shares are outperforming. The UBS-Bloomberg Ag Spot Index is declining -1.07% and copper is rising +3.13%. The 10-year yield is rising +11 bps to 3.09%, which is also a positive at this point. Weekly retail sales rose +3.7% this week versus a +4.2% gain the prior week and down from a +5.1% gain the first week of May. The Spain sovereign cds is down -3.95% to 272.5 bps, the Italy sovereign cds is down -4.5% to 169.33 bps, the Portugal sovereign cds is down -3.4% to 737.0 bps, the Belgium sovereign cds is down -3.0% to 149.17 bps and the UK sovereign cds is down -3.4% to 62.95 bps. On the negative side, Bank, Telecom, Computer Service, Utility and Paper shares are underperforming, rising less than +1.0%. (XLF) is relatively weak today. Oil is rising +2.2% and gold is gaining +.54%. The US price for a gallon of gas is unch. today at $3.70/gallon. It is up .56/gallon in less than 4 months. The Greece sovereign cds is gaining +1.04% to 1,606.67 bps, the Hungary sovereign cds is rising +1.6% to 253.29 bps and the Illinois municipal cds is rising +2.0% to 191.0 bps. The Greece sovereign cds is hitting another new record high again today. The Hang Seng Index was unable to rally overnight with the rest of Asia. The VIX is already plunging again, which remains a concern and volume is lackluster on today's advance. Investors appear to be cheering overnight data from emerging markets. However, this data makes me more worried about eventual hard landings in these key economies, not less. While the euro is bouncing and eurozone cds are coming in a bit, the situation remains tenuous. Stocks may continue to advance in the near-term, however a test of recent lows is likely over the coming weeks, unless there are material changes in the current headwinds that have recently weighed on equity prices. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth worries, eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest and rising energy prices.

1 comment:

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