Friday, July 22, 2011

Stocks Rising Slightly Into Final Hour on Tech Sector Strength, Buyout Speculation, Short-Covering, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: About Even
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 17.34 -1.14%
  • ISE Sentiment Index 126.0 -4.55%
  • Total Put/Call .90 +21.62%
  • NYSE Arms .90 +15.35%
Credit Investor Angst:
  • North American Investment Grade CDS Index 93.08 +.38%
  • European Financial Sector CDS Index 141.87 +2.23%
  • Western Europe Sovereign Debt CDS Index 285.17 -1.95%
  • Emerging Market CDS Index 212.15 -.27%
  • 2-Year Swap Spread 24.0 -1 bp
  • TED Spread 22.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .03% unch.
  • Yield Curve 257.0 -3 bps
  • China Import Iron Ore Spot $174.10/Metric Tonne unch.
  • Citi US Economic Surprise Index -92.80 +1.0 point
  • 10-Year TIPS Spread 2.37% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +30 open in Japan
  • DAX Futures: Indicating +20 open in Germany
  • Higher: On gains in my Tech, Biotech and Retail sector longs
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite terrorism fears, recent stock gains, euro currency weakness, some earnings disappointments, US debt ceiling concerns, rising food/energy prices, emerging markets inflation fears and global growth worries. On the positive side, Coal, Oil Service, Internet, Software, Computer, Semi, Disk Drive, Networking, Restaurant and Education shares are especially strong, rising more than +1.0%. Tech sector shares have substantially outperformed throughout the day. Small-caps are also displaying relative strength. "Growth" stocks are also strongly outperforming "value" shares again. Copper is rising +.51%. The Ireland sovereign cds is falling -5.28% to 865.58 bps, the Portugal sovereign cds is falling -3.0% to 917.22 bps and the Greece sovereign cds is plunging -19.24% to 1,637.75 bps. Moreover, the Eurozone Investment Grade CDS Index is dropping another -2.37% to 92.11 bps. On the negative side, Airline, Tobacco, HMO, Medical Equipment, Paper and Defense shares are under pressure, falling more than -.75%. Cyclicals are relatively weak. (XLF) is underperforming after recent gains. Oil is rising +.44%, gold is jumping +.75%, lumber is falling -2.56% and the UBS-Bloomberg Ag Spot Index is jumping +1.52%. Rice is hovering near a multi-year high, and has soared almost +30.0% in about 2 weeks. The US price for a gallon of gas is unch. today at $3.69/gallon. It is up .55/gallon in less than 5 months. The 10-year yield is falling -5 bps today to 2.96%, despite US debt ceiling concerns. The Belgium sovereign cds is gaining +3.24% to 168.87 bps, the Germany sovereign cds is gaining +4.22% to 57.64 bps and the France sovereign cds is rising +2.78% to 102.78 bps. Chinese equities were just slightly higher overnight and have been unable to rally with the rest of the world over the past three days. The rise in German/French cds is a large red flag regarding the recent debt deal. Longer-term, this deal will be viewed very poorly by the citizens of core eurozone countries. I suspect US shares can continue to rally early week as long as the debt ceiling negotiations are perceived as heading in the right direction by investors. I expect US stocks to trade mixed-to-higher into the close from current levels on tech sector strength, short-covering, bargain-hunting, buyout speculation and technical buying.

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