Thursday, August 11, 2011

Stocks Soaring into Final Hour on Better US Economic Data, Euro Bounce, Bargain-Hunting, Short-Covering


Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Every Sector Rising
  • Volume: Heavy
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 38.89 -9.54%
  • ISE Sentiment Index 107.0 +2.23%
  • Total Put/Call .98 -19.01%
  • NYSE Arms .47 -91.49%
Credit Investor Angst:
  • North American Investment Grade CDS Index 119.05 +4.67%
  • European Financial Sector CDS Index 221.25 +13.33%
  • Western Europe Sovereign Debt CDS Index 298.17 +2.52%
  • Emerging Market CDS Index 299.86 +3.97%
  • 2-Year Swap Spread 24.0 unch.
  • TED Spread 27.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 210.0 +12 bps
  • China Import Iron Ore Spot $176.10/Metric Tonne -.06%
  • Citi US Economic Surprise Index -78.80 -8.3 points
  • 10-Year TIPS Spread 2.26% -5 bps
Overseas Futures:
  • Nikkei Futures: Indicating +145 open in Japan
  • DAX Futures: Indicating +113 open in Germany
Portfolio:
  • Higher: On gains in my Biotech, Medical, Retail and Tech sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short and then added some of them back
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 is sharply higher with heavy volume on a bounce in the euro, better US jobless claims, short-covering, bargain-hunting, a reversal lower in precious metals/bonds and less financial sector pessimism. On the positive side, Coal, Steel, Oil Tanker, I-Banking, Networking, Alt Energy, Disk Drive, Bank, Insurance and Gaming shares are especially strong, rising more than +6.0% on the day. (XLF) has traded well throughout the day. Gold is falling -2.69%, copper is surging +4.0% and lumber is rising +2.48%. The 10-year yield is soaring +22 bps to 2.33%, which is a positive at this point. European equity indices put in strong showings today, rising 3-4%. The France sovereign cds is down -5.53% to 165.17 bps, the Italy sovereign cds is down -4.4% to 368.0 bps and the Belgium sovereign cds is down -4.2% to 265.0 bps. On the negative side, Telecom shares are are underperforming, rising less than +3.0%. Oil is up +5.2% and the UBS-Bloomberg Ag Spot Index is up +2.21%. Rice is still near a multi-year high, soaring +27.0% in about 6 weeks. The US price for a gallon of gas is falling -.02/gallon today to $3.62/gallon. It is up .48/gallon in about 6 months. The China sovereign cds is jumping +14.53% to 109.27 bps, the Japan sovereign cds is rising +7.84% to 108.56 bps, the Russia sovereign cds is gaining +7.25% to 218.13 bps, the Israel sovereign cds is jumping +12.25% to 169.86 bps and the Brazil sovereign cds is climbing +9.5% to 169.99 bps. The China and Brazil sovereign cds are breaking out to multi-year highs. The German sovereign cds is hitting another multi-year high and is only 6.0 bps from its Feb. 09 high of 93.0 bps. The Eurozone Financial Sector CDS Index is making another record high. Despite the +1.3% gain in the Shanghai Composite last night, Hong Kong fell another -.95% and is down -14.9% ytd. Ukraine shares plunged another -4.1% today and are down -30.2% ytd. The AAII % Bulls rose to 33.43 this week, while the % Bears fell to 44.78, which is a negative. Given the market's massively oversold state and hope of some sort of forthcoming European debt solution, I suspect we can build on today's gains in the near-term. However, gauges of Eurozone debt angst aren't falling much today, with some even rising meaningfully. Key emerging market cds continue to rise substantially. As well, the rises in the European/North American Investment Grade CDS Indices are troubling, as they likely indicate rising worries over global recession. I expect US stocks to trade modestly higher into the close from current levels on a bounce in the euro, better US economic data, short-covering, bargain-hunting, less financial sector pessimism and a reversal lower in precious metals/bonds.

2 comments:

Al said...

Hi Gary
Are u reloading on SODA?
Regards
Al

Gary said...

Not yet Al. I think the market reaction to its earnings was ridiculous, but in this environment it wasn't too surprising. I would like to see more stabilization in the economy and market before I build up my more aggressive positions again.