Friday, September 16, 2011

Stocks Rising into Final Hour on Triple Witching, Short-Covering, Falling Energy/Food Prices, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 31.40 -1.78%
  • ISE Sentiment Index 64.0 -23.81%
  • Total Put/Call 1.0 -.99%
  • NYSE Arms .86 +114.02%
Credit Investor Angst:
  • North American Investment Grade CDS Index 125.15 -1.65%
  • European Financial Sector CDS Index 250.58 +2.87%
  • Western Europe Sovereign Debt CDS Index 325.0 -1.59%
  • Emerging Market CDS Index 290.03 -2.73%
  • 2-Year Swap Spread 32.0 unch.
  • TED Spread 36.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 190.0 +1 bp
  • China Import Iron Ore Spot $177.90/Metric Tonne unch.
  • Citi US Economic Surprise Index -43.10 -.9 point
  • 10-Year TIPS Spread 1.97% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -54 open in Japan
  • DAX Futures: Indicating +29 open in Germany
  • Higher: On gains in my Tech, Medical and Retail sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, 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 recent gains despite rising Eurozone debt angst, US tax hike concerns, some more disappointing economic data, emerging markets inflation fears and global growth worries. On the positive side, Defense, Internet, Computer Service and Retail shares are especially strong, rising more than +1.0%. Oil is falling -1.41% and the UBS-Bloomberg Ag Spot Index is down -1.81%. The Greece sovereign cds is plunging -28.9% to 3,535.66 bps and the Brazil sovereign cds is declining -3.8% to 159.12 bps. On the negative side, Alt Energy, Coal, Oil Tanker, Oil Service, Steel, Networking, Wireless, Bank, Construction and Education shares are under pressure, falling more than -1.0%. Cyclicals and small-caps are underperforming. Lumber is down -2.24%, Gold is rising +1.0% and Copper is falling -.73%. Rice is still very near its multi-year high, rising +36.0% in about 10 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.61/gallon. It is up .47/gallon in about 7 months. The Germany sovereign cds is gaining +.54% to 83.33 bps, the Portugal sovereign cds is rising +.29% to 1,061.0 bps and the Ireland sovereign cds is gaining +.72% to 798.33 bps. The Western Europe Sovereign CDS Index is still near its all-time high. The 3-Month Euro Basis Swap is falling -5.21 bps to -87.12 bps. The TED spread is now at the highest level since July 2010 despite Europe's recent efforts. The China Development Bank Corp CDS is falling today, however it has risen +15.0% over the last 5 days despite most other cds falling. The Shanghai Composite failed to rally again overnight, despite nice gains in most of the rest of Asia, and is now down -11.6% ytd. Given the negative news out of Europe today's stock advance is more impressive. (AMZN) and (AAPL) are on fire of late, which is helping boost the Naz. However, breadth is poor and it is hard to gauge how much triple witching is helping prop up equities. Unless the news out of Europe improves over the next few days, I suspect we will give some of this week's stock gains back next week. I expect US stocks to trade mixed to lower into the close from current levels on profit-taking, rising Eurzone debt angst, global growth worries, emerging markets inflation fears and more shorting.

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