Tuesday, September 13, 2011

Stocks Rising into Final Hour on Euro Bounce, Short-Covering, Tech Sector Strength, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 37.28 -3.39%
  • ISE Sentiment Index 126.0 +56.79%
  • Total Put/Call 1.32 +5.60%
  • NYSE Arms .88 +36.59%
Credit Investor Angst:
  • North American Investment Grade CDS Index 134.68 -1.18%
  • European Financial Sector CDS Index 285.55 -1.48%
  • Western Europe Sovereign Debt CDS Index 352.18 +.28%
  • Emerging Market CDS Index 306.14 -2.41%
  • 2-Year Swap Spread 33.0 -1 bp
  • TED Spread 34.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 178.0 +6 bps
  • China Import Iron Ore Spot $179.40/Metric Tonne -.06%
  • Citi US Economic Surprise Index -38.50 +1.0 point
  • 10-Year TIPS Spread 1.95% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -11 open in Japan
  • DAX Futures: Indicating +29 open in Germany
  • Higher: On gains in my Tech, Biotech, Medical and Retail sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my(EEM) short, then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 builds on yesterday's reversal higher despite rising Eurozone debt angst, rising energy prices, US tax hike worries, emerging markets inflation fears and global growth worries. On the positive side, Airline, Road & Rail, HMO, I-Bank, Networking, Disk Drive, Paper, Oil Tanker and Alt Energy shares are especially strong, rising more than +2.0%. Small-Cap and Cyclical shares are outperforming. Copper is rising +.47% and the UBS-Bloomberg Ag Spot Index is down -1.2%. Weekly retail sales rose +4.7% versus a +4.9% gain the prior week. The Spain sovereign cds is falling -5.9% to 401.5 bps. On the negative side, Homebuilding, Insurance and REIT shares are lower on the day. Lumber is down -.89%, Oil is rising +1.5% and Gold is gaining +1.4%. Rice is still very near its multi-year high, rising +37.0% in about 10 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.64/gallon. It is up .50/gallon in about 7 months. The France sovereign cds is rising +1.77% to 191.83 bps, the Greece sovereign cds is surging +13.17% to 4,074.24 bps and the UK sovereign cds is gaining +4.0% to 85.97 bps. The Greece, France and Italy sovereign cds are hitting all-time highs again today. The Germany sovereign cds is still very close to its record high. The Eurozone Financial Sector CDS Index is still near its record high and the Western European Sovereign CDS Index is making another all-time high. The The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative. The Shanghai Composite fell another -1.1% overnight and is back near its recent lows, declining -12.0% ytd. Brazilian shares did not participate in today's global stock rally and are now down -19.8% ytd. Most gauges of eurozone debt angst remain very elevated and continue to trend higher, which remains a large negative. The euro currency remains oversold near-term, but still has substantial downside risk longer-term. I continue to believe that until the fundamentals stabilize in the eurozone and credit angst subsides, any stock rallies will likely remain short-term in nature. Today's volume is lackluster and some key groups aren't participating. I expect US stocks to trade modestly lower into the close from current levels on rising eurozone debt angst, global growth worries, emerging markets inflation fears, more shorting, rising energy prices and profit-taking.


Tim- said...

why couldn't the sovereign governments sell credit protection on their own debt, default, then just put the bonds to themselves?

Anonymous said...

great idea! but would anyone buy it knowing the identity of the seller?