Monday, September 19, 2011

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, US Tax Hike Fears, Financial Sector Pessimism, Global Growth Worries

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 34.02 +9.88%
  • ISE Sentiment Index 55.0 -11.29%
  • Total Put/Call .91 -5.83%
  • NYSE Arms 1.94 +144.67%
Credit Investor Angst:
  • North American Investment Grade CDS Index 128.13 +2.38%
  • European Financial Sector CDS Index 270.17 +10.85%
  • Western Europe Sovereign Debt CDS Index 340.60 +5.12%
  • Emerging Market CDS Index 304.88 +4.84%
  • 2-Year Swap Spread 32.0 unch.
  • TED Spread 35.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 179.0 -11 bps
  • China Import Iron Ore Spot $177.50/Metric Tonne -.22%
  • Citi US Economic Surprise Index -42.20 +.9 point
  • 10-Year TIPS Spread 1.89 -8 basis points
Overseas Futures:
  • Nikkei Futures: Indicating -185 open in Japan
  • DAX Futures: Indicating +28 open in Germany
  • Slightly Lower: On losses in my Tech and Medical sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my EEM short and then covered some of them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 is rolling over at its downward-sloping 50-day moving average on rising Eurozone debt angst, increasing financial sector pessimism, US tax hike concerns, some more disappointing economic data, emerging markets inflation fears and global growth worries. On the positive side, Restaurant shares are higher on the day. Oil is falling -2.76%, Gold is down -1.85% and the UBS-Bloomberg Ag Spot Index is down -.6%. On the negative side, Road & Rail, Education, Construction, Insurance, I-Banking, Bank, Oil Service and Coal shares are under significant pressure, falling more than -3.0%. Cyclicals and small-caps are substantially underperforming. Copper is falling -3.72%. Rice is still very near its multi-year high, rising +33.5% in about 11 weeks. The average US price for a gallon of gas is -.02/gallon today to $3.59/gallon. It is up .45/gallon in about 7 months. The Germany sovereign cds is gaining +8.3% to 90.17 bps, France sovereign cds is surging +8.05% to 181.50 bps, the Italy sovereign cds is rising +6.2% to 472.50 bps, the Russia sovereign cds is gaining +6.1% to 229.33 bps, the Belgium sovereign cds is gaining +6.9% to 266.50 bps, , the Brazil sovereign cds is gaining +6.1% to 168.79 bps, the Portugal sovereign cds is rising +5.62% to 1,114.67 bps and the Spain sovereign cds is jumping +9.6% to 406.83 bps. The Germany sovereign cds is now only about 3 basis points away from its record high reached on Feb. 24, 2009. The France and Italy sovereign cds are still near their record highs. The Russia sovereign cds is close to breaking out of a multi-year trading range. The Western Europe Sovereign CDS Index and European Financial Sector CDS Index are still near their all-time highs. The 2-Year Euro Swap Spread is very close to a multi-year high, rising +4.07 bps to 98.81 bps. The 3-Month Euro Basis Swap is falling -4.90 bps to -92.03 bps. The TED spread is still at the highest level since July 2010 despite Europe's recent efforts. The Emerging Markets Currency VIX is surging 8.2% to 14.6, which is the highest since June 2010. Hong Kong stocks fell -2.8% overnight, and are now down -17.9% ytd, which places them back near their recent lows. The major European stock indices fell around -3% today and continue to trade poorly. Select growth stock leaders, such as (AAPL), remain on fire, which is masking broad-based weakness. The Naz is flat on the day, however breadth is -1,363. Volume is also lackluster on today's surge off the lows. The 10-year yield is falling too much again, declining -10 bps to 1.95%. Various credit gauges are indicating rising global recession fears. However, it appears to me equity investors expect stagnant growth, rather than true recession, which is likely the main reason a handful of true growth stocks are seeing huge outperformance and multiple expansion. I expect US stocks to trade mixed to lower into the close from current levels on profit-taking, rising Eurzone debt angst, increasing financial sector pessimism, global growth worries, emerging markets inflation fears, US tax hike worries and more shorting.

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